9th December 2013 at 4:44pm
My blog on last week’s Autumn Statement prompted a number of readers to get in touch. One question in particular, from David S, asked about Capital Gains Tax and how it was affected by the Autumn Statement. I thought I’d follow-up on this topic with 10 facts about Capital Gains Tax, including the tax changes in the Autumn Statement.
Capital Gains Tax – the basics
- Capital Gains Tax could be due when you sell or gift away something valuable. It taxes growth in value/profit between the date you acquired something and the date you sell/gift it.
- It generally doesn’t apply to personal belongings worth £6,000 or less.
- You generally don’t pay Capital Gains Tax when you sell your car.
- The current tax rates are 18% and 28% for individuals. If you pay income tax at 40% or more, your capital gains tax rate is generally 28% (tax year 2013/14).
- There’s an annual exempt amount which is tax-free. This is £10,900 for tax year 2013/14. The Autumn Statement announced it’s going up to £11,000 for 2014/15 and then £11,100 for 2015/16.
Capital Gains Tax and relationships
- Capital Gains Tax generally isn’t due if you give something to your husband, wife or civil partner. But it may be due when that spouse/civil partner later sells the property you gave to them.
- Capital Gains Tax doesn’t apply when someone dies – that’s when Inheritance Tax might be relevant instead.
- Capital Gains Tax can sometimes be due when assets change hands between a couple who divorce, or a couple who dissolve a civil partnership. If this applies to your situation, it’s important to take independent legal advice to understand how Capital Gains Tax might affect you.
Capital Gains Tax and residential property – Autumn Statement changes
- If you own one property and live in it, it’s exempt from Capital Gains Tax when you sell it. But if you own more than one property, you may have Capital Gains Tax to pay when you sell one of your properties. Generally, the last 36 months before the sale are not taken into account when the Capital Gains Tax bill is calculated, if the owner previously lived there at some point. The Autumn Statement announced a change to this. From April 2014, the final period of exemption is reduced from 36 months to 18 months. This makes it likely that landlords will pay more Capital Gains Tax when selling a rental property which used to be their home.
- The Autumn Statement announced a future change in April 2015, affecting overseas owners of UK properties. The intention is to charge non-UK resident owners Capital Gains Tax when they sell UK residential properties. These new rules are not finalised yet.
For more information, there’s a full Guide to Capital Gains Tax on the H M Revenue and Customs website.
Laws and tax rules may change in the future. The information here is based on our understanding in December 2013.