In this section:
See acquisition
When you acquire an asset. For Capital Gains Tax purposes this could be 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
You may 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, providing you 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, 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. They are entitled to it 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 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', you're treated as if the disposal was not at arm's length.
If you don't dispose of an asset at arm's length, it 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
Chattel is a legal term for an asset that is tangible, you can touch and move it. Your personal possessions might be chattels.
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 - for example, 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 stop owning 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 a house you inherited 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 in the UK, you're taxable on gains you make in the UK and abroad.
See also non-domicile, residency
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 HM Revenue and Customs.
See costs
Providing certain conditions are met, the commercial letting of furnished holiday accommodation in the UK or in the European Economic Area is treated as a trade.
For more information about the conditions go to Helpsheet253
This means that you can claim some Capital Gains Tax reliefs that are normally associated with business assets. For example:
See more on furnished holiday lettings in the Self Assessment tax return notes (PDF 832K)
Find out more about Capital Gains Tax reliefs for business assets
See gilts
Gilts are a type of investment issued by the UK Government. They are in sterling. They 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, includes 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
An intangible asset is an asset that you can't touch, move or physically measure.
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 own shares that become worthless, or almost worthless, you may be able to make a Negligible Value Claim. You can then work out your loss as if you'd sold the shares for their negligible value.
Download the latest helpsheet on Negligible Value Claims - Helpsheet 286 (PDF 80K)
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 28 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 561K)
Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.
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. 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. 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
There are two types of ownership:
The beneficial owner is usually the one who's liable to Capital Gains Tax.
Example 1
The deeds to a second home are in the husband's name. He is the legal owner, but both he and his wife may be entitled to the profits from the sale of the house. They are therefore joint beneficial owners and jointly liable to Capital Gains Tax.
Example 2
Assets are held in a bare trust. The trustee is the legal owner. The beneficiary of the trust is the beneficial owner and is therefore the one who is liable to Capital Gains Tax.
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. 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 (QCB) is a corporate bond that meets certain qualifying conditions. Any profit on the sale or disposal of a QCB 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 561K)
Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.
Your residency status in each tax year can affect your tax liability. A new statutory residence test comes into affect from 6 April 2013.
Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.
See non-domicile
Download guidance on residency and domicile and the tax implications (PDF561K)
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. You're given a certificate - or there's electronic evidence - that shows you're the owner.
Your taxable gains or taxable amount' for the year is the amount of your total gains that is liable to Capital Gains Tax:
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. These include Gift Hold-Over Relief and Entrepreneurs' Relief.
You'll find detailed explanations of each term in the Capital Gains Tax manual - see the link below.
Find detailed explanations in the Capital Gains Tax manual
Find out more about reliefs on business assets
See gilts
See residency
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
