Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What do you have to pay Capital Gains Tax on?
If you sell or dispose of your personal possessions and make a gain (profit), then you may have to pay Capital Gains Tax if you sell the item for more than £6,000 (this doesn’t usually include the selling of cars).
HMRC considers Capital Gains Tax payable on the sale of the following kinds of possessions:
Coins and stamps
Valuable ‘sets’ of things, such as chess pieces, matching vases or crockery sets.
HMRC expect you to calculate your gain, or profit, and then work out whether you are liable to pay Capital Gains Tax on that gain.
You only pay the tax on the profit that you make, so if you sell an antique table for £7,500 but it originally cost you £5,000 then you would only potentially be liable for Capital Gains Tax on the £2,500 profit (gain) you made, not the total £7,500 sale price.
When don’t you pay it?
You don’t usually pay Capital Gains Tax on gifts you make to your husband or wife, civil partner or to a charity.
You also don’t pay Capital Gains Tax on the following:
Your car – unless you used it for business purposes
Anything that has a limited lifespan (HMRC consider this to be 50 years or less), unless it has been used for business – this would include items such as clocks or wine that isn’t considered to be a ‘fine wine’.
If you are the joint owner of the asset then you are exempt from paying Capital Gains Tax on the first £6,000 of your share of the asset.
How do you work out your gain?
HMRC consider your gain (or profit) to be the difference between what you paid for it in the first place and how much you have sold it for. However, sometimes they will expect you to use the market value of the possession instead of the sale price of the item.
You would use the market value if:
The possession was given as a gift (not including gifts to spouses, civil partners or a charity – in which case Capital Gains Tax wouldn’t be payable).
You sold it for less than it was worth as a favour to the buyer.
You inherited it and you don’t know its Inheritance Tax value.
You owned it before April 1982.
Then you would calculate your gain on the difference between what you paid for it and the market value of the item. HMRC can check the market valuation you use to calculate your gain (profit) but be warned that it takes around 2 months for them to check, so this isn’t a quick option to take and it might be easier to find out the market value yourself.
If this all sounds really complicated, don’t worry – our friendly team of experts is on hand to help you through the process. Call us on 0330 122 9972.
Can you deduct any costs?
If you have incurred any costs during the buying, selling or improving of your personal possession, you might be able to deduct certain costs from your profit. HMRC allow the following deductions to be made:
Fees you have picked up, for example for having your item valued or advertising it.
Any costs you have incurred from improving your item – although this doesn’t include normal repairs because HMRC would consider that a cost you would have to pay anyway.
VAT – unless you are able to reclaim it.
However, there are some costs which HMRC won’t let you deduct from your gain, such as:
Any interest you may have paid on a loan to buy the possession.
Any costs that you can claim elsewhere as a business expense.
Our team of experts can help you if you’re not sure whether something can be claimed as a business expense – call our tax preparation experts on 0330 122 9972.
What if you sold it for between £6,000 and £15,000?
You might be able to reduce your taxable gain if you got between £6,000 and £15,000 for your possession when you sold it.
To do this you need to do the following:
Take £6,000 away from the amount you received.
Multiply this by 1.667
Use whichever is the lower amount – this new figure or your actual gain.
For example, if you sold an antique vase for £11,500 that you originally bought for £2,000 – the above calculation would work out as:
(£11,500 – £6,000) x 1.667 = £9,168.50
The original calculation would have been:
(£11,500 – £2,000) = £9,500
In this example, you would be able to use the lower figure of £9,168 as your taxable amount.
How do you work out if you need to pay?
To work out whether you are liable for Capital Gains Tax, you need to work out all of your gains for the tax year (6th April to 5th April the following year). If this amount is greater than your tax-free allowance – also referred to by HMRC as your Annual Exempt Allowance and not to be confused with your personal income tax allowance – then you will have to pay Capital Gains Tax on that amount above your tax-free allowance.
If you have used your possession for any business purposes, you might be eligible for tax relief to reduce the amount of any Capital Gains Tax you need to pay.
How do you report a loss?
The rules are slightly different if you need to report a loss. You can claim losses for any possessions sold for less than £6,000 and you work out your loss by using £6,000 as the amount you sold your possession for and reporting in your self-assessment tax return.
Our tax preparation specialists can help you with this – call our team on 0330 122 9972.
What about possessions with a limited lifespan?
If your possession has a limited lifespan, which HMRC consider to be less than 50 years, then you don’t need to pay any Capital Gains Tax on these profits. These possessions include all machinery, so this will also include such items as watches or clocks.
This only applies if you haven’t used the possession for business. Unfortunately, if you have, the asset is still liable for Capital Gains Tax – unless it doesn’t quality for capital allowances. If it does qualify, you might have to pay Capital Gains Tax on your profits from selling the possession but you can’t report any losses from it because HMRC consider it to have had a limited lifespan anyway.
What about possessions that are part of a set?
If you sell some or all the set to the same person for less than £6,000 you aren’t liable for Capital Gains Tax.
If you sell parts of the set to different people, you won’t pay Capital Gains Tax on any part that was sold for less than £6,000.
HMRC considers a set to include any possessions that would naturally go together – for example, all of the pieces in a china tea set, or a set of antique books by the same author.
How can DSR Tax Claims help?
We know that working out your Capital Gains Tax for your personal possessions can be a very complicated affair, even with our helpful guide to tell you everything you might need to know. it’s all very well reading about it and knowing what HMRC’s stand on it is – but how do you apply that to your own circumstances? It can seem like an absolute minefield but help is always available and you don’t need to battle through this alone. Our team of experts at DSR Tax Claims are always on hand to help our client and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all the paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.