- Capital Gains Tax on personal possessions: the basics
- How to calculate capital gains and losses on personal possessions
How to calculate capital gains and losses on personal possessions
This step-by-step guide will help you calculate capital gains and losses if you sell or otherwise dispose of personal possessions for the 2008-09 tax year. You'll find here examples of the special rules that apply for 'tangible and movable' personal possessions (meaning you can touch and move them).
On this page:
- Working out your capital gains or losses for 2008-09
- Step 1: Work out how much you received
- Step 2: Work out how much your personal possession cost
- Step 3: Work out how much you spent to buy, sell or improve your personal possessions
- Step 4: Work out the gain or loss so far
- Step 5: Apply tax reliefs
- Step 6: Work out your Capital Gains Tax bill
- If you sold your personal possessions before 6 April 2008
- More useful links
Working out your capital gains or losses for 2008-09
You have to work out the gain or loss separately for each personal possession that you sell, give away or otherwise dispose of. This step-by-step guide explains how to do that in straightforward cases.
But some personal possessions that you can touch and move aren't liable to Capital Gains Tax, for example:
- your car
- possessions worth £6,000 or less
- certain possessions that have a short lifespan
You can find out more about typical taxable possessions using the link below.
If you sell or dispose of other assets in 2008-09, for example shares, property and business assets you must work out each gain or loss separately too. See the 'More useful links' section at the bottom of this page for more help with this.
Find out more about typical taxable possessions
Step 1: Work out how much you received
The amount received for your personal possession is usually the sale price, eg the amount of money you received for the possession when you sold or disposed of it.
However, sometimes you need to use the market value of the possession (the price it might reasonably be expected to have fetched on a sale in the open market) instead of the sale price.
When to use market value - some examples
You use the market value of the personal possession instead of the sale price if, for example:
- You give the possession away.
- You intentionally sell or dispose of the possession for less than it's worth.
- You sell or dispose of the possession to a ‘connected person’, such as a close relative or a company you control. But see the special rules below if the connected person is a husband, wife or civil partner and the link below for more on 'connected persons'.
See the glossary for more on 'connected persons’
Special rules for husbands, wives and civil partners
Your husband, wife or civil partner is a person you're connected with.
But unlike other people you're connected with (eg your brother), if you sell or dispose of a personal possession to them you usually won't have to pay any Capital Gains Tax on that disposal. You must have lived together for at least part of the tax year in which you make the disposal.
If you're separated for the whole of the year in which the disposal occurs, you must work out the gain or loss and use the market value of the asset disposed of, at the date of disposal, as the amount received.
See more on gifts, separation and divorce
Download the latest help sheet on husband and wife; civil partners - Help Sheet 281 (PDF 66K)
Step 2: Work out how much your personal possession cost
The cost of your personal possession is normally the amount you paid when you bought or acquired it.
However, sometimes you need to use the market value of the personal possession (the price your possession might reasonably have been expected to have fetched on a sale in the open market) instead of the cost.
Using market value - some examples
You use the market value of the possession instead of the cost if:
- You owned the possession at 31 March 1982 - you use the market value on that day.
- The possession was a gift - you use its market value when it was given to you. Or see the section below if it was a gift from a husband, wife or civil partner - special rules apply.
- You inherited it - you use its market value on the date of death of the person who left it to you.
Special rules for husbands, wives and civil partners
If you received the asset from your husband, wife or civil partner when you were living together, you usually use the amount the asset cost them.
But if your husband, wife or civil partner owned the asset at 31 March 1982, you use the market value on that day instead.
If your husband, wife or civil partner originally acquired the asset before 1 April 1998 and transferred it to you before 6 April 2008, you may be entitled to Indexation Allowance. This takes inflation into account and may reduce your tax bill.
Read more about Indexation Allowance
Checking the market value
If you want HM Revenue & Customs (HMRC) to check your valuation, to help you complete your Self Assessment tax return, you should complete and send form CG34 Post Transaction Valuation Check to your Tax Office after you've disposed of the asset.
Please allow at least two months for HMRC to check the valuation.
Go to form CG34 Post Transaction Valuation Check
Step 3: Work out how much you spent to buy, sell or improve your personal possessions
If you have spent extra money to buy, sell or improve a personal possession, you can deduct certain costs.
Costs you can deduct include:
- fees or commission for professional advice or services, eg Capital Gains Tax valuations or advertising fees
- improvement costs to increase the value of the personal possession - but not normal maintenance costs, such as repairs
- VAT (unless you can reclaim the VAT)
Find out more about reclaiming VAT
Step 4: Work out the gain or loss so far
Personal possessions worth more than £6,000
You need to work out the gain or loss so far.
Losses - if you'd sold the possession at a loss, check out the time limits for claiming it, see the link below.
What to do if you've made a loss
Gains - if you received less than £15,000 for your asset - there's an extra step you need to include in your calculation - as you may not have to pay tax on all of the gain.
This step is there to make sure that you don't pay tax in full for a possession worth £6,001, when you wouldn't have paid tax at all on a possession worth £6,000 or less. It works on a sliding scale.
To work this out:
Step 1: work out how much more than £6,000 the amount you've received is - then multiply this figure by five-thirds.
Step 2: compare this with the actual gain.
Step 3: include the lower amount as your capital gain.
Example
In August 2008 you sold an antique for £7,500.
Step 1:
The amount received is £1,500 more than the £6,000 exemption
limit.
You multiply £1,500 by five-thirds getting a figure of £2,500.
Step 2:
You sold the antique for £7,500.
It cost you £2,000.
So the actual gain is £5,500.
Step 3:
You only pay Capital Gains Tax on the lower amount of £2,500 and
not on the actual gain.
Personal possessions worth £6,000 or less
You need to work out the gain or loss so far.
Gains - if your possession was individually worth £6,000 or less when you sold or disposed of it, the gain is not liable to Capital Gains Tax.
Losses - if you made a loss on a possession worth £6,000 or less, the loss you can claim is restricted. You're treated as if you'd disposed of the asset for £6,000 instead - this has the effect of restricting the loss that's allowable.
Example
In June 1999 you bought a painting for £8,000.
In June 2008 you sold the painting for £5,500.
The painting was worth less than £6,000 when you sold it, so the loss you can claim is restricted.
To work out the loss, you're treated as if you'd sold the painting for £6,000.
The loss you can claim is £2,000 (£8,000 less the deemed sale price of £6,000) and not £2,500 (£8,000 less the actual sale price of £5,500).
What to do if you've made a loss
Step 5: Apply tax reliefs
If you've used your personal possession for business purposes you may be able to apply certain tax reliefs. See the link below to the business area to find out more.
Capital Gains Tax reliefs for business assets
Step 6: Work out your Capital Gains Tax bill
Through steps 1 to 5, you've worked out the gain or loss on your personal possession and applied any reliefs due.
If you sell or dispose of other assets in 2008-09, you must repeat these steps to work out the separate gain or loss for each asset.
See the 'More useful links' section below for help on working out gains and losses on other types of assets and for guidance on when and how to claim if you've made a loss.
Once you've worked out all of your individual gains and losses, as above, for each asset you’ve sold or disposed of, you'll need to work out the overall gain or loss to see the tax due.
In most cases:
- You add together all of your gains for that tax year.
- You add together all of the allowable losses you've made for that tax year.
- You deduct the losses from the gains to work out the overall gain or loss.
- If the overall gain is below your annual tax-free allowance (known as the ‘Annual Exempt Amount’), there's no Capital Gains Tax to pay.
- If the overall gain is above the Annual Exempt Amount, you can deduct unused allowable losses from a previous tax year to reduce your gains to the Annual Exempt Amount. You can carry the rest forward to future tax 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.
- If you've made a loss - check out the time limits for claiming it - see the 'More useful links' section below.
Find out more about the annual tax-free allowance
Example
Mr P's total gains in the 2008-09 tax year are £70,600.
The Annual Exempt Amount for individuals for 2008-09 is £9,600.
Mr P's gains are above this amount - so he deducts the Annual Exempt Amount from his gains.
He is liable to tax on £61,000 (£70,600 - £9,600 = £61,000).
The Capital Gains Tax rate is 18%.
He must pay Capital Gains Tax of £10,980 (£61,000 × 18%).
Look up Capital Gains Tax rates and tax-free allowances
If you sold your personal possessions before 6 April 2008
Different rules applied if you sold or disposed of personal possessions before 6 April 2008.
Work out your capital gains on personal possessions sold in 2007-08
More useful links
Property - a step-by-step guide to working out your capital gains
Shares - a step-by-step guide to working out your capital gains
Business assets - a step-by-step guide to working out your capital gains
