Although you will pay Capital Gains Tax on most capital gains, there are some gains that are not subject to Capital Gains Tax – and focusing on those tax-free gains makes for effective tax planning.
For example, when you’re realising your assets, it can be more tax-effective to think about disposing of those assets which don’t attract capital gains tax (CGT).
But which capital gains are tax free? And how do you use them to maximise your tax efficiency?
Highlighting the tax-free capital gains
Your gains are free of CGT up to a current threshold of £12,300. This annual threshold is offered on a ‘use it or lose it’ basis – any unused allowance is not carried forward to future years, so it’s best to use up the allowance where you can.
For most people, the single largest CGT-free capital gain they make is the sale of the family home. To qualify, your property must have:
- Been your only, or main, residence throughout the period of ownership.
- Not been rented out or any part of it used exclusively for business purposes.
Any gain you realise when you sell the property won’t be taken into account for CGT purposes, so you won’t lose any of your sale price to CGT.
Property isn’t the only area which benefits from this treatment. There are some other assets that can be sold at a profit without being subject to CGT.
The other main tax-free capital gains are:
- Your car
- Personal possessions, including antiques, jewellery and paintings valued at up to £6,000 each (if you start a business selling these items then that would be classed as trading income).
- Shares held in tax-free ISAs (investment savings accounts)
- UK ‘Gilt-edged’ securities, such as premium bonds, treasury bonds and National Savings & Investments (NS&I) certificates
- Gains on any foreign currency bought for personal use outside the UK
- Lottery and betting winnings
- Compensation awards for personal injury
- Gains on Enterprise Investment Scheme (EIS) shares held for more than 3 years.
Talk to us about your CGT potential liabilities
If you’re thinking of selling your home and don’t meet the provisions above, talk to us so we can advise you on any potential capital gains tax issues that could affect you.
If you’d like to know more about tax-free capital gains and when you’re disposing of any meaningful assets, talk to us so we can advise you of any CGT implications and how to plan accordingly.