Some changes in your circumstances may make you liable to pay Capital Gains Tax when you don't expect it. Capital Gains Tax may be due when you give something away, sell a valuable item or transfer assets in a divorce. When you inherit an asset, there will only be Capital Gains Tax to pay if you later sell or dispose of it and make a gain.
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If you sell, give away, exchange or otherwise dispose of an asset and make a profit or gain, you may have to pay Capital Gains Tax.
So you may have to pay Capital Gains Tax when you give an asset as a gift to someone.
The rules are different depending on who you give the gift to.
You won't have to pay Capital Gains Tax when you give a gift to your husband, wife or civil partner - as long as both of the following apply:
However, if your husband, wife or civil partner later sells or disposes of the asset, they'll have to pay the tax on any gain. Tax will be due on any gain made over the total period of ownership - yours and theirs. But they'll only need to work out the gain since 31 March 1982. There's now no Capital Gains Tax due on gains arising before that date.
It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset.
Mr B lives with his wife and gives her an antique table that he bought for £12,000 in 2002.
Mrs B spends £500 restoring the table, eventually selling it for £20,000.
Her total costs are £12,500 (£500 plus Mr B's original cost £12,000).
Mrs B's gain is £7,500 (£20,000 less £12,500).
More on how to work out your Capital Gains Tax
Capital Gains Tax on personal possessions: the basics
When you make a gift to a family member or other person you're connected with, you'll need to work out the gain or loss. This doesn't apply to gifts you make to your spouse or civil partner.
This also applies if you dispose of an asset to them in any other way - for example, you sell it to them for a low price.
A 'connected person' in this context is someone such as your brother, sister, child, parent, grandparent, mother-in-law or business partner. Follow the link below for more information about connected people and Capital Gains Tax.
You must get a valuation of the asset at the time you made the gift. Use this value in place of any amount you received for the asset to work out your gain or loss. If you gave the asset away, then of course the amount you received for it will be nothing.
If you make a loss you can only deduct the loss from gains you make on gifts or other disposals to the same person.
Read more about 'connected people' in the Capital Gains Tax glossary
How to work out your Capital Gains Tax
You may not have to pay Capital Gains Tax on gifts of assets to a registered UK charity.
Find out about tax and making gifts to charity
When someone dies, the assets they own pass to the person looking after the estate. This person is known as the 'executor' or 'personal representative'. There's no Capital Gains Tax to pay at that time, even though the assets have changed hands.
The executors or personal representatives are responsible for dealing with any Capital Gains Tax due to the date of death. Capital Gains Tax may be due on assets that the person sold or disposed of before they died.
After they've dealt with all the tax and financial matters of the estate, the personal representatives pass the remaining assets to the 'beneficiaries'. Beneficiaries are people who inherit assets. There's no Capital Gains Tax even though the assets have changed hands.
The personal representatives may sell or dispose of the assets and pass on the money (or 'proceeds') instead. They'll need to work out the gain or loss on the disposal of the assets.
If you're acting as a personal representative for the estate of someone who's died, you may find the links below useful.
Find out about tax returns for personal representatives
When you inherit an asset from someone who's died, there's no Capital Gains Tax to pay at that time.
There won't be any Inheritance Tax due either if the whole of their estate is worth less than the Inheritance Tax threshold (£325,000 in 2012-13 and 2013-14).
The personal representatives will usually pay any Inheritance Tax due from the estate's assets before you receive your share.
When you sell or dispose of an inherited asset, you may be liable to Capital Gains Tax on any profit or gain you make.
You'll need to get a valuation of the asset at the date of death. Use this value as the cost of your asset to work out your gain or loss. If the value has been agreed for Inheritance Tax purposes you should use the same valuation.
Find out more about Inheritance Tax
How to work out your Capital Gains Tax
Sometimes when you separate, divorce or dissolve a civil partnership, you need to transfer assets between partners.
There may be Capital Gains Tax to pay. It depends on whether the transfer took place:
If you transfer an asset to your husband, wife or civil partner in the year of separation, the same rules apply as for gifts. See the section above 'Gifts to your husband, wife or civil partner'.
You won't have to pay Capital Gains Tax if both of the following apply:
Special rules apply if you transfer an asset to your husband, wife or civil partner in the tax year after you've separated. You'll have to work out the capital gain or loss if all of the following apply:
You'll need to get a valuation of the asset on the date of the transfer. You use this value as the proceeds (the amount received) for your asset to work out your gain or loss.
If you transfer your main residence to your spouse or civil partner, the gain is covered by Private Residence Relief. There's no Capital Gains Tax to pay as long as it has been your only or main residence throughout the time that you owned it. The final three years always qualify for relief even if you weren't living there. But to get this relief a property must have been your main home at some point during the time that you owned it.
Find out more about tax reliefs on your own home
The rules for the transfer of assets after a divorce or the 'dissolution' (the formal end) of a civil partnership are complex. You'll need to seek further advice to make sure you get your Capital Gains Tax right.
You need the following details before you contact HM Revenue and Customs (HMRC) or professional adviser:
If you transfer your main residence to your spouse or civil partner, the gain is covered by Private Residence Relief. There's no Capital Gains Tax to pay as long as it's been your only or main residence throughout the time that you owned it. The final three years always qualify for relief even if you weren't living there, as long as it has been your main home at some point during the time that you owned it.
Find out more about tax reliefs on your own home
