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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' (things you can touch and move). This guide deals with those personal possessions - including assets such as jewellery or antiques.
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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 no longer own it. You may have:
For example if you give a valuable painting to your children, you'll have to work out if there's Capital Gains Tax to pay.
In some cases you're treated as if you've disposed of an asset. For example a personal possession has been destroyed and you've received an insurance payout, in compensation.
Capital Gains Tax is due on the profit or gain you make, not on the amount of money you receive for the asset.
Personal possessions that may be liable to Capital Gains Tax when you sell or dispose of them include:
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:
In straightforward cases you need to
Read the step-by-step guide below to find out more.
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 on selling your car.
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.
Assets with a limited lifespan are called wasting assets. You can't claim a loss on most personal possessions that are wasting assets. See the section on wasting assets for more on this.
You pay Capital Gains Tax through the Self Assessment system and it's 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 HM Revenue and Customs. You may have to pay a penalty if Capital Gains Tax is due you don't send in a tax return.
You should keep any records and information that might help you work out your capital gain or loss.
Different rules apply to working out if the value of the possession is above £6,000 if you own it jointly with someone else.
Each owner's share of the possession when it's sold or disposed of is compared with each person’s limit of £6,000.
Mr and Mrs Patel buy a painting in 1991 for £2,000.
In 2012 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.
A 'set' is a number of personal possessions that complement one another and are worth more together than separately. Examples may include:
If you sell or dispose of personal possessions as a set, the £6,000 limit applies to the set as a whole.
If 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. You cannot apply the limit separately to each sale.
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. Mrs Jones must pay Capital Gains Tax on the gain.
When you give an asset away you usually work out your gain or loss as if you've sold it at market value. Market value is the price you'd expect to receive if you sold it on the open market. This also applies if you sell an asset for less than it is worth.
There are some exceptions to this. These apply if you give the asset to:
Follow the link below for more.
An asset is a 'wasting asset' if its useful life when you bought or acquired it could be predicted to be 50 years or less, taking into account why you acquired it.
All machinery is automatically treated as having a life of 50 years or less. So any machinery is classed as a wasting asset, an antique clock for example.
Personal possessions that are wasting assets are exempt from Capital Gains Tax - unless you can claim ‘capital allowances’ for them.
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. This applies only if 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.
Sometimes an 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 you receive more than the asset's value when you acquired it, the difference between the two may be liable to Capital Gains Tax.