In this section:
See acquisition
For Capital Gains Tax purposes an acquisition of an asset is, for example, when you buy, inherit, or receive an asset as a gift or receive it in exchange for something else. You don't necessarily have to pay money to acquire it.
See costs
If you make a loss when you sell or otherwise dispose of an asset that's liable to Capital Gains Tax, the loss will normally be an allowable loss, as long as you've made a claim for it. This is sometimes also called a 'capital loss'.
Losses resulting from tax avoidance schemes may not be allowable losses.
See what to do if you've made a loss
This is the annual tax-free allowance you, as an individual, are usually entitled to each year before you have to pay Capital Gains Tax.
Personal representatives or executors of a deceased person's estate are also entitled to the Annual Exempt Amount for the tax year in which someone dies and the next two tax years.
Most trustees are entitled to half the Annual Exempt Amount that individuals are entitled to.
Find out how to use the annual tax-free allowance
If you're 'resident' in the UK, you'll normally be taxed on the arising basis.
This means that you'll be liable to pay UK tax when you dispose of an asset - whether the asset is in the UK or abroad.
See also remittance basis and residency
When you sell or dispose of an asset 'at arm's length', it's just like a normal commercial transaction. You seek to obtain the best deal, as does the person acquiring the asset from you.
A disposal that's not made at arm's length might be, for example:
If you sell or otherwise dispose of an asset to a 'connected person' (ie your husband, wife, civil partner or child), you're treated as if the disposal was not at arm's length.
A disposal of an asset that's not at arm's length can affect how much Capital Gains Tax you pay.
See connected person
See more examples of arm's length disposals in the HMRC Capital Gains Tax manual
Assets are things you can own, such as:
See also goodwill and chattels
There's a special rule for deciding which shares you've sold when you buy more shares of the same class in the same company within 30 days of the sale, this is sometimes called the 'bed and breakfasting rule'.
It prevents you making a gain or loss on shares you've sold and bought back almost immediately.
Read more about the 'bed and breakfasting' rule and how to match shares
See ownership
A bonus issue is when new free shares are issued by a company. The number of shares issued is in proportion to each person's existing shareholding. It's sometimes also called a 'scrip issue'.
You may make a capital gain when you sell or dispose of an asset that's increased in value since you acquired it.
If any amount you receive for the disposal is liable to Income Tax, you won't include that amount when you work out your capital gains or losses. For example, if you sell an antique as an antiques dealer, you'd include the amount received in working out your Income Tax bill - you wouldn't include it in your Capital Gains Tax calculation too.
See allowable losses
This is when you get from your asset:
If you're liable to Income Tax on the sum received, you won't be liable to Capital Gains Tax on it too.
See more on 'capital sums' in the Capital Gains Tax manual
See rights issue
A chargeable asset is an asset that may be liable to Capital Gains Tax when you sell or dispose of it.
Your 'chargeable gains' are your gains on assets that are liable to Capital Gains Tax before you deduct:
See also taxable gains and Annual Exempt Amount
Chattels are essentially personal possessions. Chattel is a legal term for an asset that is 'tangible', ie you can touch and move it.
Examples include:
Find out about Capital Gains Tax on personal possessions
See connected person
A connected person could be, for example:
For Capital Gains Tax purposes, you deduct your costs to work out the gain or loss on the sale or disposal of an asset. Only some costs are 'allowable'.
Allowable costs may include:
Sometimes you use the market value of the asset instead of the actual cost (eg if you received the asset as a gift).
See market value
How to work out your gain or loss
You usually dispose of an asset when you cease to own it. For example, if you:
For Capital Gains Tax purposes, a disposal includes a 'part-disposal'. For example, you may have disposed of a part share in an inherited property or you may have sold half of your collection of antique furniture.
Sometimes you're treated as having disposed of all or part of an asset even though you still own it - so you're 'deemed' to have disposed of it. For example when you:
See examples of 'disposals' in the HMRC Capital Gains Tax Manual
See examples of 'deemed disposals' in the HMRC Capital Gains Tax Manual
See disposal
Everyone has a country of domicile. You can only have one country of domicile at a time.
You're normally domiciled in the country where you have your permanent home, but factors such as your country of origin can affect your domicile too.
If you don't have foreign gains, your domicile status doesn't matter for Capital Gains Tax purposes.
If you're domiciled in the UK and resident or ordinarily resident in the UK, you're taxable on gains arising in the UK and abroad.
See also non-domicile, residency and ordinary residence
You make an election when you specifically choose to have your gains or losses worked out in one way instead of another for Capital Gains Tax purposes.
You would make an election by writing to your Tax Office.
See costs
A furnished holiday letting is a property in the UK (or in the European Economic Area for 2008-09 onwards) that:
Providing certain conditions are met, the commercial letting of furnished holiday accommodation is treated as a trade. This means that certain Capital Gains Tax reliefs (that are normally associated with business assets) can be claimed, for example:
See more on 'furnished holiday lettings' in the Self Assessment tax return notes (PDF 93K)
Find out more about Capital Gains Tax reliefs for business assets
Read about changes to the tax treatment of holiday lettings, and European holiday lettings (PDF 61K)
See gilts
Gilts are a type of investment issued by the UK Government. They are in sterling and are usually either Premium Bonds or investments that pay a fixed rate of interest and have a date when they end or mature. Gilts are sometimes called 'gilt-edged securities' or 'UK government gilts'. Gains on the disposal of gilt-edged securities are exempt from Capital Gains Tax. Any loss on the disposal would not be an allowable loss.
Goodwill, in very simple terms, is the reputation, good name and relationships that a business has built up over the years it has been operating.
Goodwill can have a monetary value placed on it. If you sell all or part of your business as a going concern, you need to include the value of the goodwill when you work out your gain or loss.
See more on goodwill in the Capital Gains Tax manual
A holding company is usually a company that does not produce goods or provide services itself (other than perhaps to its own group members). Its main purpose is holding shares in other companies that it owns. It's often the principal company in a group, with a 50 per cent or more shareholding in each of its subsidiary companies.
See also trading company
If you sold or disposed of an asset before 6 April 2008 that you'd acquired on or before 31 March 1998 Indexation Allowance would be due.
Indexation Allowance reduces the amount of your capital gain by taking account of inflation on the cost of the asset and on costs that improve the value of the asset for the period up to April 1998. Indexation Allowance can't be used to turn a gain into a loss or to increase a loss.
It was replaced by Taper Relief in April 1998.
See Taper Relief
Find out more about working out Indexation Allowance
An intangible asset can't be touched, moved or physically measured.
Some examples are:
See ownership
See allowable losses
This is the price your asset might reasonably be expected to fetch on the open market.
See when to use market value when working out your gain or loss
If you're not domiciled in the UK (known as 'non-domiciled') it can affect your tax treatment. Every case is different, but your domicile may be affected by factors such as:
To find out more, please download the guide below. There are some flowcharts on page 25 that may help you decide your domicile status.
If you're non-domiciled in the UK, you may wish to use the 'remittance basis' of tax, which affects how your worldwide assets are taxed.
See also remittance basis
Download the HMRC guide to residency, domicile and the remittance basis (PDF 753K)
If you don't meet the conditions for 'residency', you're described as 'non-resident'.
If your normal home is outside the UK and you are in the UK for fewer than 183 days in the tax year you may be non-resident, but many other factors need to be taken into account, for example your lifestyle and connections with the UK.
Your residency status can affect your tax liability. If you're non-resident in the UK, you'll still have to work out the gain or loss on most assets you sell or dispose of in the UK and you may not get the same tax allowances as someone who is resident in the UK.
See also residency
Download guidance on how your residency status affects your taxes (PDF 753K)
Your 'ordinary residence' position usually only matters if you have income or gains from outside the UK.
If you're resident in the UK year after year, you're usually 'ordinarily resident' too. This means you'll be taxable on all gains arising in and outside of the UK.
If you're 'not ordinarily resident' (you normally live somewhere outside the UK) you may still be 'resident' in the UK in a particular tax year - perhaps because you've spent a lot of time here, for example you spent 183 days or more here in that particular tax year.
If you're 'resident' but 'not ordinarily resident' you may be able to claim the 'remittance basis' - but this will only affect how your foreign income is taxed - you'll still be taxable on all gains arising in and outside the UK for that tax year.
You have to be 'resident' and 'non-domiciled' to be able to claim the remittance basis on any foreign gains.
See also residency, non-domicile and remittance basis
Find out more about residency, domicile and the remittance basis (PDF 753K)
There are two types of ownership:
The beneficial owner is usually the one who's liable to Capital Gains Tax.
For example:
A personal company is a term used to describe a company that you have a certain level of control in.
The term helps to define whether an asset is classed as a business asset for Capital Gains Tax relief purposes, eg one of the criteria may be that the shares are in a personal company.
For Gift Hold-Over Relief and Taper Relief a personal company is one where you have at least 5 per cent of the voting rights.
For Entrepreneurs' Relief a personal company is one where you own at least 5 per cent of the ordinary share capital and that gives you at least 5 per cent of the voting rights.
See more about 'Gift Hold-Over Relief'
A qualifying corporate bond (also known as a QCB) is a corporate bond that meets certain qualifying conditions - so that any profit on its sale or disposal is exempt from Capital Gains Tax and any loss is not an allowable loss.
Corporate bonds are issued by a company when it wishes to raise capital. By buying the bond, you're loaning money to the company that must be repaid by a set date.
Most sterling bonds, securities, debentures, loan notes and loan stock are qualifying corporate bonds.
You may be able to use Extel, the Financial Times or other publications to check if your bonds are classed as qualifying corporate bonds. Or you may find guidance in the paperwork that came with your corporate bonds when you first got them.
If you're 'resident' but 'non-domiciled' in the UK, you can choose one of two ways of taxing your capital gains:
Please see the link below to find out more about:
Find out more about residency, domicile and the remittance basis (PDF 753K)
Your residency status in each tax year can affect your tax liability.
You're usually 'resident' in the UK if you spend a great deal of time here - or choose to live and work here on a regular basis.
If you spend 183 days or more in the UK in a tax year, you'll automatically be resident here for that tax year. You may still be resident here if you spend less than 183 days here, for example if you come here on a regular basis and have a settled lifestyle connecting you with this country.
If you're resident in the UK, you'll usually have to work out the gain or loss on assets you sell or dispose of both in and outside the UK.
If you don't live in the UK every year, if you and your parents were born abroad or if you plan to return abroad, your residency status may be more complicated - you may be 'not ordinarily resident' or 'non-domiciled' in the UK and this can affect your tax position.
See ordinary residence and non-domicile
Download guidance on residency and domicile and the tax implications (PDF 753K)
See residency
A rights issue is when a company gives existing shareholders the right to buy extra shares. The number of shares offered is in proportion to each person's existing shareholding. It's also sometimes called a 'cash call'.
There's a special rule for deciding which shares you've sold when you buy more shares of the same class in the same company on the same day, this is often called the 'same day rule'.
It prevents you making a gain or loss on shares you've sold and bought on the same day.
Find out more about the same day rule in our guide to finding out the cost of your shares
See bonus issue
A security is an asset that, broadly speaking, has a financial value that is negotiable and is interchangeable with other similar assets. They're usually assets such as stocks and bonds and you're given a certificate - or there's electronic evidence - that shows you're the owner.
If you sold or disposed of an asset before 6 April 2008 you may have been entitled to Taper Relief - this reduced the proportion of the gain that was taxed. The size of the reduction depended on:
The relief was introduced for disposals after 5 April 1998 and ended for disposals after 5 April 2008.
Download Help Sheet 279 about Taper Relief (PDF 100K)
Your 'taxable gains' or 'taxable amount' for the year is the amount of your total gains that is liable to CGT:
See also Annual Exempt Amount
'Trading company', 'trading group' and 'trading activities' are terms used to help define whether an asset is classed as a business asset for some types of Capital Gains Tax reliefs - eg Gift Hold-Over Relief, Entrepreneurs' Relief or Taper Relief.
You'll find detailed explanations of each term in the Taper Relief pages of the Capital Gains Tax manual (see the link below). The same definitions are used for Gift Hold-Over Relief (from April 2002), for Entrepreneurs' Relief and for many other Capital Gains Tax business reliefs.
Find detailed explanations in the Capital Gains Tax manual
Find out more about reliefs on business assets
See gilts
See residency and ordinary residence
A wasting asset has a predictable life of 50 years or less.
All plant and machinery are treated as wasting assets.
When you sell a wasting asset, there may be some restriction of the costs you can deduct in calculating your gain or loss.
Personal possessions may be exempt from Capital Gains Tax if they are wasting assets.
Find out more about Capital Gains Tax on personal possessions
