Capital Gains Tax (CGT)
Tax on profit when you sell or give away assets that have increased in value. Different from inheritance tax and has its own exemptions.
Capital Gains Tax (CGT) is tax on the profit (gain) when you dispose of an asset that has increased in value. It's different from income tax and inheritance tax.
When CGT Applies
- Selling investments (shares, funds)
- Selling property (not your main home)
- Giving away assets (treated as sold at market value)
- Receiving compensation for loss of assets
Current Rates (2024-25)
- Annual exempt amount: £3,000
- Basic rate taxpayer: 10% (18% for residential property)
- Higher rate taxpayer: 20% (24% for residential property)
CGT and Death
Important: There's no CGT on death. Assets pass at market value on death (called "rebasing"). This can be valuable for estate planning:
- Selling before death triggers CGT on the gain
- Inheriting and then selling means CGT only on post-death gains
- This is called "uplift on death"
Main Exemptions
- Your main home (private residence relief)
- Transfers between spouses
- ISAs and pensions
- Personal belongings under £6,000 each
- Gifts to charity
Common questions
Is there CGT when someone dies?
No. Assets are rebased to market value at death. CGT only applies if beneficiaries later sell at a higher value.
Do I pay CGT on inherited property?
Only on gains after you inherited it. If you inherit at £300,000 and sell at £350,000, CGT is on the £50,000 gain.
Can I give assets to my spouse to avoid CGT?
Transfers to spouses are CGT-free, but they take on your original cost basis. The gain is just deferred.
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