Within our library of blogs, we have given you the lowdown on Capital Gains Tax (CGT), talked about transferring property between spouses and claiming for using your home for your business. Let’s bring these topics together and explore the implications for your future CGT tax bill.

A quick recap on Capital Gains Tax

CGT is the tax you pay if you sell, give away, exchange or otherwise dispose of an asset and make a profit or ‘gain’ from it. It is the gain that is taxed, not the amount you receive for the asset. To calculate the gain, you compare the sale proceeds with the original cost of the asset. 

Assets such as a second home, antiques or shares are the items most commonly taxed but there are two different rates of CGT – one for property and one for other assets (other than gains qualifying for Entrepreneurs Relief or Investors relief, both of which are taxed at 10%, which are outside of the scope of this article). The amount of CGT you pay depends on your tax bracket:

Tax BracketCGT rate: other assetsCGT rate on property
Basic rate10%18%
Higher/additional rate20%28%

For the tax year 2019/20, the CGT allowance rises from £11,700 to £12,000, which doubles to £24,000 for jointly-owned assets. If you are married or in a civil partnership, you are free to transfer assets to each other without any CGT charged. 

CGT on gifted assets

  1. To a spouse/civil partner?

You don’t pay CGT when you make a gift to your husband, wife or civil partner – as long as you lived together for at least part of the tax year when you made the gift and the gift is not ‘trading stock’ (goods bought for resale).

If your spouse or civil partner then sells or disposes of the asset another way, they will have to pay the tax on any gain made for the total period of ownership, i.e. since the date it was first acquired by you (or 31 March 1982, if later). So it is worth keeping a note of what the asset cost for your spouse or civil partner to work out their CGT when they dispose of the asset.

  • To another family member?

When you make a gift to a family member or other person you are ‘connected’ with, you need to work out the gain or loss. This also applies if you dispose of an asset to them in any other way, for example, you sell it to them for less than it is worth. If you make a capital gain, you may have to pay CGT.

Using my home for my business

If you run your business from your home, you need to look at the use of your home when you sell or dispose of it, to calculate the CGT. If you use a room in your home for business and it’s also a spare bedroom, for instance, this does not impact the CGT relief.

If you use a part of your home justfor business purposes – a workshop for instance – that part will not be exempt from CGT. So if you sell your home at a profit, you have to work out the amount of relief due and work out if there is any CGT to pay.

If you are finding Capital Gains Tax far too taxing, contact CRM for up-to-date advice and expertise. Call CRM on 01865 379272.

Sage Accountant Partner Logoiris kashflowFreeagent