Capital gains tax is charged on any profits (the ‘gains’) you make when you sell (or transfer) shares and unit trusts or other assets which include a second home. Working out how much CGT you have to pay can be tricky and only needs to be paid if you make a certain amount of profit from the sale of your assets in any given tax year.
For the 2015/16 tax year the annual allowance is set at £11,100. There are two CGT tax rates, the basic rate which is at 18%, and the higher rate where CGT is set at 28%.
If you are a basic rate taxpayer because you have a lower income, but have made large enough taxable capital gains to push you over the limit where tax is charged at 40% (£42,386 taxable income), you will pay the higher rate of CGT on the portion of gains that takes you over the limit.
You do not have to pay capital gains tax on assets you give or sell to your husband, wife or civil partner, unless:
You do not have to pay CGT on assets you give away to charity however, you may have to pay if you sell an asset to charity for both:
You can work out your gain using the amount the charity actually pays you, rather than the value of the asset.
Capital gains tax is normally not payable on gains you make on your only or main home because these qualify for private residence relief (PRR). However, part of any gain could still be taxable if any of the following occurs:
It should be noted that if you do have more than one you can pick whichever one you want to be tax-free. Most people tend to pick the one which has potential to make the most gain meaning you would save more.
Married couples or civil partnerships can only pick one home between them. Unmarried couples can each pick different ones.
In the UK subject to many other taxes and the more you know about them the better. Below are some you can learn more about.