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Tax on Property, Money and Shares you Inherit

Tax on Property, Money and Shares you Inherit

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make on selling an asset you have inherited. There is only tax due on what you have gained, not the money that you receive.

For example, you purchased a car for £25,000 and later sold it for £30,000. This would mean you made a gain of £5,000 (30,000 – 25,000).

There are certain assets which are exempt from capital gains tax, and you will also not have to pay capital gains tax if all of your gains in a year fall under tax free allowance.

There are two types of capital gains tax you need to be aware of. One is for property and the other is for assets. For both, the amount you will have to pay is dependent on both the asset you’ve profited from and your tax band.

Tax bracket CGT rate on assets CGT rate on property
Basic-rate payer 10% 18%
Higher or additional rate payer 20% 28%

When do I have to pay Capital Gains Tax?

The capital gains allowance for the tax year 2021/22 is £12,300, meaning that this is the amount you can profit from the sale of an asset before any tax is due on it. This is unchanged from last year.

If you jointly own assets with another person, you can combine your allowances, doubling the amount you can accrue before tax is due. Moreover, if you are married or in a civil partnership, you can transfer assets to your spouse or partner without capital gains tax being owed on this.

Tax Year 2020-21 2021-22
CGT allowance for an individual £12,300 £12,300
Couple’s allowance (married or in a civil partnership) £24,600

£24,600

Nevertheless, if you choose to transfer any of your assets to your partner and if you decide to sell the asset later, you will be charged according to the gain you made whilst you were a couple, as opposed to when the asset was passed to your partner.

If you do not use your total capital gains allowance in one year, you will not be able to carry it on to the following year.

What do I have to pay Capital Gains Tax on?

Typical items or investments you may have to pay inheritance tax on include:

  • Most personal possessions over the value of £6,000, excluding your car
  • Any property that isn’t your main home
  • Your main home if it is used for business, or very large
  • Any shares that aren’t held in an ISA
  • Business assets

These are all known as chargeable assets

What don’t I have to pay Capital Gains Tax on?

  • ISAs or PEPs
  • UK government gilts or premium bonds
  • Betting or lottery winnings

Capital Gains Tax and Inheritance Tax

When you inherit an asset, inheritance tax will be paid by the estate of the person who has died. You will only need to work out Capital Gains Tax if you decide to dispose of the asset at a later point.

When do I have to pay Capital Gains Tax?

There needs to be a significant profit on your assets in order for you to be taxed on them.

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