{"id":201584,"date":"2025-04-23T23:35:13","date_gmt":"2025-04-23T23:35:13","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/capital-gains-tax-cgt-basics\/"},"modified":"2025-04-23T23:35:13","modified_gmt":"2025-04-23T23:35:13","slug":"capital-gains-tax-cgt-basics","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=201584","title":{"rendered":"Capital Gains Tax (CGT) Basics"},"content":{"rendered":"


\n<\/p>\n

\n
\n
\n

Do you think you might need to pay some CGT?
<\/strong><\/p>\n<\/div>\n

\n

Have you received a letter from HMRC indicating that they think you might have CGT to pay?<\/strong><\/p>\n<\/div>\n<\/div>\n

CGT is a complex area, and we would always recommend getting advice if you need it. However, this blog includes some high-level CGT basics to point you in the right direction!<\/h3>\n
\n

When would I pay CGT instead of Income Tax?<\/h2>\n

Generally speaking, a transaction becomes chargeable to CGT when it involves the disposal of an asset<\/strong>. For example; shares in a company, a house that isn\u2019t your home or collectibles. You wouldn\u2019t regularly be disposing of these kinds of assets and so it is common for this type of disposal to be a one-off transaction.<\/p>\n

You are only charged to tax on your gain<\/strong> and, if you make a loss and tell HMRC, you are able to carry that loss forward indefinitely to offset against future gains.<\/p>\n

This is in contrast to when you might be considered to be trading in those assets. For example, an individual who is regularly buying and flipping houses would be considered to be trading in property and subject to income tax instead. To work out if this might be you, consider the badges of trade<\/a>.<\/p>\n

Most disposals will either be chargeable to Capital Gains Tax or Income Tax unless they are exempt (see below).<\/p>\n

Tangible, moveable property<\/h2>\n

Sometimes referred to as \u201cchattels\u201d, this term refers to something you own that you can touch and move like antiques, furniture and motor vehicles (although it is important to note that your private vehicle will be exempt from CGT).<\/p>\n

Below is a table demonstrating how you calculate your capital gain on chattels:<\/em><\/p>\n

\n\n\n\n
Did you receive less than \u00a36,000 in sales proceeds when you sold the chattel?
<\/strong>
If so, this disposal is exempt from CGT and there is no need to report it on your tax return. \u00a0 \u00a0<\/td>\n		Were your proceeds more than \u00a36,000 but less than \u00a315,000?<\/strong><\/p>\n

If so, then you need to apply a specific set of steps to work out the gain that is chargeable:<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0 How much did your sale proceeds exceed \u00a36,000 by?
2.\u00a0\u00a0\u00a0\u00a0 Multiply that figure by 5\/3
3.\u00a0\u00a0\u00a0\u00a0 The result is the maximum chargeable gain
4.\u00a0\u00a0\u00a0\u00a0 Compare with the actual net gain (i.e. proceeds less cost)
5.\u00a0\u00a0\u00a0\u00a0 The lower of step 3 and 4 is your chargeable gain<\/p>\n<\/td>\n

Did you receive less than \u00a36,000 in sale proceeds AND make a loss? <\/strong><\/p>\n

If you make a loss on a chattel and the proceeds are less than \u00a36,000, your loss is restricted by treating the disposal proceeds as if they were \u00a36,000 (regardless of what you actually received). \u00a0 If your proceeds were more than \u00a36,000, no such restriction applies.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

\n
\n

Any other asset<\/h2>\n

The rules above only apply to tangible, moveable property.<\/p>\n

If your asset is fixed (like a house) or intangible (like shares or cryptocurrencies<\/a>) then the gain is calculated differently. Broadly, the gain will be your sale proceeds less any associated costs including original cost, enhancement expenditure and costs to sale.<\/p>\n

In the case of share disposals, it is important to note that specific \u2018matching\u2019 rules apply to calculate the gain or loss on disposal. Unless you are familiar with these rules then it is advisable to obtain the support of a tax adviser.<\/p>\n

In some cases, sale proceeds are assumed to be market value rather than cash received, so it is important to understand when those rules come into consideration. Most commonly this is when a sale is made at undervalue or not \u201cat arms length\u201d.<\/p>\n<\/div>\n

\n

What is exempt<\/h2>\n

Common example of exempt assets are:<\/p>\n