Introduction to capital gains tax

By Tolley
  • (Updated for Budget 2020)
Personal_tax_img10

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Introduction to capital gains tax
  • Chargeable person
  • Chargeable disposal
  • Chargeable assets
  • Date of disposal
  • Annual exempt amount
  • Reporting
  • Calculation of capital gains tax liability
  • Due date for tax payment
  • Overseas aspects

In general terms, a charge to capital gains tax arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a profit (known as a gain) or a loss.

 

In general terms, a charge to capital gains tax arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a profit (known as a gain) or a loss.

See Checklist ― calculation of capital gains and losses for issues to consider when reporting client gains and losses.

Chargeable person

A chargeable person could be an individual, a trustee, a personal representative or a company (although companies are subject to corporation tax on chargeable gains not capital gains tax). For further discussion, see CG10700. 

TCGA 1992, s 1A (from 6 April 2019); TCGA 1992, s 1 (up to 5 April 2019)

Exempt persons include, amongst others, charities and local authorities, see CG10760.

Generally, if an individual is resident in the UK in the tax year they are chargeable to tax on capital gains arising in that tax year. See ‘Overseas aspects’ below for a discussion on the taxation of gains on non-resident individuals and those accessing the remittance basis of assessment. 

TCGA 1992, s 1A (from 6 April 2019); TCGA 1992, s 2 (up to 5 April 2019)

Chargeable disposal

The most common way for a person to dispose of an asset is to sell it to another person. However, a gift or an exchange also constitutes a disposal for capital gains tax purposes. There are provisions within the capital gains tax legislation that provide for the loss or destruction of an asset also to be treated as a disposal for capital gains tax.

Chargeable assets

Assets are chargeable for capital gains tax purposes unless they are specifically exempt. If assets are exempt from capital gains tax, this means that gains are not chargeable but also losses are not allowable. See the Exempt assets guidance note. 

TCGA 1992, s 21

Date of disposal

The date of the disposal determines when the gain arises and therefore the tax year in which it is subject to capital gains tax (unless the remittance basis applies, see ‘Overseas issues’ below).

The date of disposal depends on the type

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