When do you have to pay Capital Gains Tax in the UK?

It's important to understand the rules around capital gains tax, how it is calculated, and when it is due.

Capital Gains Tax (CGT) is tax on the profit you make when you sell, give away, or transfer something that has increased in value. You pay tax on the gain and in most cases, the tax is due on 31 January after the end of the tax year through your Self Assessment Tax Return. The main exception is UK property, where a CGT return and payment is required within 60 days of the date of completion of the sale.

How to calculate Capital Gains Tax?

A capital gain arises when an asset is worth more when you sell it than when you bought it. A disposal can include a sale, gift, transfer or exchange.

CGT is a tax on the profit when you sell and it can apply to things like shares, a second home, business assets, or cryptocurrency.

The capital gain is calculated by taking the sale value of the asset and deducting the original amount you paid for the asset, any capital improvement costs and certain allowed costs. It is important to keep clear records of purchase costs, sale proceeds, any fees paid and improvement costs to help calculate and report the CGT.

The CGT rates are at 18% for basic rate taxpayers and 24% for higher rate taxpayers.

Your total CGT can be reduced further by any losses and the first £3,000 of the capital gain are generally CGT free as this is the individual’s annual exemption. The £3,000 annual exemption cannot be carried forward and therefore it will be lost if not used.

How does Capital Gains Tax apply to UK Property?

UK tax residents who sell/transfer UK residential property are required to report and pay any CGT due within 60 days of the date of completion.

A valuable tax relief is available when an individual sells their main residence. This relief may exempt all or part of the capital gain and if the whole gain is exempt then no CGT will be payable. To qualify for Principal Private Residence Relief the UK property has to be the individual’s main residence.

If you sell a property that was your main residence at any point, the final nine months of ownership are normally exempt from CGT, even if you were not living in the property during that period.

The lower CGT tax rate for residential property is 18% and the higher rate of CGT on the disposal of residential property is 24%.

Do I need to report Capital Gains Tax?

If you sell UK residential property and have CGT to pay you will need to report this gain and pay the CGT within 60 days of the date of completion of the sale.

For non-residential property gains, CGT is normally reported through the individual’s Self Assessment Tax Return and the deadline for this is the 31 January after the end of the tax year.

Frequently asked questions

Do you pay Capital Gains Tax on the full sale price?
Capital Gains Tax is calculated on the profit, not the full amount received.

Is Capital Gains Tax paid in the same way as income tax?
In most cases it is paid through your Self Assessment tax return.

Do I pay Capital Gains Tax straight after selling something?
For most assets, you wait until the end of the tax year and pay by the following January. For UK residential property gains the tax is paid within 60 days from the date of completion.

Can a gift create Capital Gains Tax?
Yes, gifting an asset can still count as a disposal for UK tax purposes. In many cases the gain is measured as if it was an arms length transaction using the market value, even if no money changes hands.

What if you make a loss?
An allowable capital loss can be used to reduce gains in the same tax year. If it is not fully used, it can be carried forward to offset against future capital gains.

Do you pay Capital Gains Tax when you sell your main home?
If the whole gain is covered by Principal Private Residence Relief then no CGT will be due. However, part of the gain may be taxable if the property has not always qualified as your only or main residence.

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