UK Capital Gain Rules

Capital gain is the increase in value of an asset when you sell it.

An asset is considered disposed if:

1. You sell it
2. Gift it
3. Swap in return for something else
4. Get insurance payment for damaged or stolen asset
   
   

What you pay Capital Gain Tax (CGT) on?

Simple answer is most possessions that are worth £6,000 or more excluding your main home and your car. You also have to pay capital gain on shares unless they are invested in an ISA which are tax exempt.

There are also special rules concerning gifts between spouses, meaning that you can gift an asset to your spouse or civil partner and there will not be any capital gain tax. But bear in mind that normal stamp duty rules will apply.

UK share matching rules

If you have been investing in shares and now have to calculate the capital gains for your portfolio most of the time you would not have to do this yourself because the investment broker you are using will provide you with a nice tax year report. You can then take the capital gain totals directly into your Self-Assessment Tax Return SA100.

However, if you do have to calculate this in the event that you are using a new broker or doing investments directly you need to use what is know as share matching.

What is the 30-day rule for CGT?

The rule simply determines the capital gain tax liability that is due by determining which shares have been sold and when.

This is done as follows:

1. Shares bought and sold on the same day are matched
2. Then the shared acquired within 30 days are disposed off
3. Then section 104 holding applies where the shares are pooled
   
   

How is section 104 holding calculated?

With the first two self-explanatory we will look at how section 104 works.

The best way to look at this is by looking at an example.

Let’s assume that you purchased shares in Apple. In January 100 shares at £250, in March 150 shares at £300 and in December 150 shares at £350. That means you have purchased a total of 400 shares for £900. So the average price per share is £900/400=£2.25.

So, if you sold a portion of your portfolio lets say 50 shares, the base cost will be 50 x £2.25 = £112.50.

So, when calculating the capital gain, you need to know the total number of shares and how much you bought them for.

What is the Capital Gain Tax (CGT) Annual Exempt Amount (AEA)?

For 2021-22 tax year the amount was £12,300 but this is being reduce to £6,000 in 2023-24 tax year and finally to £3,000 by 2024-25.

Reporting and paying Capital Gain Tax (CGT).

Most of the capital gains can be reported at the end of the tax year when you prepare your Self-Assessment Tax Return SA100. However, there are special rules for the disposal of properties.

If you sold a residential property in the UK after October 2021 you have to report and pay any Capital Gain Tax within 60 days.

You need to create a UK Property account for Capital Gain and this can be done following the link below:

Report and pay your Capital Gains Tax: If you sold a property in the UK on or after 6 April 2020 – GOV.UK (www.gov.uk)

Do I have to report UK property sale as non resident?

Yes, you do, but there are different rules concerning how the gain can be calculated.

How can Finanche help?

We have accountants that do Capital Gain returns on daily basis. You will be surprised by the number of clients that would come to us expecting to pay tax on their property sale to find out that either they have much less to pay than they thought or nothing at all. So contact us for a free non-obligations chat.