In this section:
- Capital Gains Tax on personal possessions: the basics
- How to calculate capital gains on personal possessions
Capital Gains Tax on personal possessions: the basics
You may have to pay Capital Gains Tax if you make a profit or gain when you sell or otherwise dispose of an asset. Special rules apply for personal possessions that are 'tangible and movable' (meaning that you can touch and move them). This guide deals with those personal possessions - including assets such as jewellery or antiques.
On this page:
- What is Capital Gains Tax?
- Typical taxable possessions
- Working out Capital Gains Tax
- Making a loss
- Reporting a gain or loss
- Jointly owned possessions
- Sets of possessions
- Making gifts
- Wasting assets (assets of a limited lifespan)
- Insurance payouts on possessions
- More useful links
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit or gain you make when you sell or otherwise ‘dispose of’ an asset.
You usually dispose of an asset when you cease to own it - for example if you sell it, give it away as a gift, transfer it to someone else or exchange it for something else.
For example if you make a gift of a valuable painting to your children, you'll have to work out if there's any Capital Gains Tax to pay on the disposal of the painting at that time.
In some cases you're treated as if you've disposed of an asset. For example a personal possession, such as an antique, has been destroyed and you've received a capital sum, such as an insurance payout, by way of compensation.
It's the gain you make - not the amount of money you receive for the asset - that's taxed.
Typical taxable possessions
Personal possessions that may be liable to Capital Gains Tax when you sell or dispose of them include:
- jewellery
- paintings
- antiques
- coins and stamps
These are examples of assets that you can physically touch and move, ie they're tangible and moveable - and special rules apply.
The special rules mean that you don't pay Capital Gains Tax on:
- Your private car
- Personal possessions that are individually worth £6,000 or less at the time you sell or otherwise dispose of them - this covers many household articles such as fridges and sofas. But there are slightly different rules for assets that form part of a set - see the section on 'sets of possessions' below.
- Most personal possessions that are 'wasting assets' - these are assets with a limited lifespan that often lose their value over time. See the section on 'wasting assets' below.
Working out Capital Gains Tax
To work out your Capital Gains Tax you'll need to look separately at each asset disposed of that's liable to Capital Gains Tax and in straightforward cases:
- Take the disposal proceeds (usually the amount received) and deduct your costs and tax reliefs to work out each gain or loss.
- Add together all of your gains for that tax year.
- Add together all of the losses you've made for that tax year.
- Deduct any allowable losses you've made that year from the gains to work out the overall gain or loss.
- If the overall gain is below the annual tax-free allowance (known as the ‘Annual Exempt Amount’), there's no Capital Gains Tax to pay. The Annual Exempt Amount for individuals is £9,600 for 2008-09 and £10,100 for 2009-10.
- If the overall gain is above the Annual Exempt Amount, you may be able to deduct unused losses from earlier years.
- If the overall gain is still above the Annual Exempt Amount, you deduct the Annual Exempt Amount and pay tax at 18 per cent on the balance.
Making a loss
There are some special rules if you've made a loss on the following personal possessions:
- Your private car - you can't claim any loss.
- Personal possessions that are individually worth £6,000 or less at the time you sell or otherwise dispose of them - the loss you can claim may be restricted. See the link to the step-by-step guide if this applies to you - there's an example there of how this works.
- Most personal possessions that are 'wasting assets' (assets with a limited lifespan) - you can't claim a loss in most cases. See the section on wasting assets for more on this.
If you've made any losses you'll usually need to claim them in order to deduct them from your gains.
See a step-by-step guide to working out a gain or loss on personal possessions
Read more about claiming losses
Reporting a gain or loss
Capital Gains Tax is paid through the Self Assessment system and will be calculated as part of your Self Assessment tax return. If you haven't received a tax return, but think you need one, you should contact your Tax Office. You may face a penalty if you don't.
You should keep any records and information that might help you work out your capital gain or loss.
More on reporting gains and time limits
Jointly owned possessions
If you own a personal possession jointly with someone else, different rules apply when working out if the value of the possession is above £6,000 when you sell or dispose of it.
Each owner’s share of the possession when it's sold or disposed of is compared with each person’s limit of £6,000.
Example - selling a jointly owned painting
Mr and Mrs Patel buy a painting in 1989 for £2,000.
In 2008 they sell it for £11,000, each being entitled to £5,500 - half of the amount received.
The amount each of them received (£5,500) is less than the £6,000 limit, so they each have no Capital Gains Tax to pay on their share of the painting.
Sets of possessions
A ‘set’ is a number of personal possessions that complement one another and are worth more together than separately. Examples may include:
- chessmen
- books by the same author
- matching vases
- sets of china or porcelain
If you sell or dispose of personal possessions as a set, the £6,000 limit applies to the set as a whole.
And if, for example, you sell parts of a set to the same person in separate sales, the £6,000 limit still applies to the set as a whole and not to each sale.
Example - selling a set
Mrs Jones has a set of six chairs worth £30,000.
She sells the chairs individually to an antique dealer for £5,000 each.
If the £6,000 limit were to be applied to each chair, the sales would be exempt from Capital Gains Tax.
But the chairs form a set, so the £6,000 limit applies as if she had disposed of the set as a single asset for £30,000 and Mrs Jones must pay Capital Gains Tax on the gain.
Making gifts
When you give an asset away - or sell it for less than it's worth - you usually work out your gain or loss as if you've sold it at market value (the price you'd expect to receive if you sold it on the open market).
Some exceptions are if you give the asset to your husband, wife or civil partner or to a registered charity - follow the link below for more.
Wasting assets (assets of a limited lifespan)
A personal possession will be a 'wasting asset' if its useful life at the time you bought or acquired it could be predicted to be 50 years or less - having taken into consideration why you acquired it.
All machinery - an antique clock for example - is automatically treated as having a life of 50 years or less and so is classed as a wasting asset.
Personal possessions that are wasting assets are exempt from Capital Gains Tax - unless you can claim ‘capital allowances’ for them.
Capital allowances
Capital allowances allow people in business and employees to take into account the loss of value ('depreciation') of an asset when they work out their Income Tax liability - as long as they've used the asset in their trade or employment.
If you can claim capital allowances for a wasting asset, you may be liable to Capital Gains Tax when you sell or dispose of it. Any losses you can claim are restricted, normally to nil, because of the capital allowances claimed.
Find out more about Income Tax allowances and reliefs
See a step-by-step guide to working out Capital Gains Tax on personal possessions
Insurance payouts on possessions
Sometimes a personal possession or other asset that would normally be liable to Capital Gains Tax (for example a piece of jewellery worth over £6,000) is lost or destroyed.
If you receive an insurance payout or other sum for the item, you're treated as disposing of the asset for Capital Gains Tax purposes.
If the sum you receive is more than the asset's value when you acquired it, the difference between the two - the gain - may be liable to Capital Gains Tax.
