Do I owe capital gains tax on possessions?
When you sell certain personal possessions - including art, antiques and collectibles including rare coins and stamps - you may need to pay capital gains tax.
The item will be subject to CGT if you sell it for more than £6,000, but your tax-free allowance will also apply.
- Get a headstart on your 2019-20 tax return with the Which? tax calculator - tot up your bill and submit directly to HMRC.
CGT rates for possessions
Profits you make on the sale of possessions are taxed in the same way as other capital gains.
This means if you've made less than £12,300 total in 2020-21 (or £12,000 in 2019-20), you won't need to pay anything.
If your gain is between £6,000 and £15,000, you'll either pay tax on the actual gain, or for 5/3rds of what you sold it for, less £6,000. You can choose whichever is lower.
If you've made more, you'll pay 10% if you're a basic-rate taxpayer, and 20% if you're a higher rate taxpayer.
Find out more: see a detailed breakdown in our guide to CGT rates and allowances.
When will you pay CGT on possessions?
Broadly, most tangible, movable property will be taxed under the capital gains rules.
- household furniture
- paintings, antiques, crockery, china and silverware
- lorries and motorbikes
- items of plant and machinery that aren't permanently attached to a building
- fine wine that could be stored for more than 50 years
- collectible sets, such as chessmen, libraries of books or matching ornaments
That said, many private possessions are exempt from CGT.
You won't need to pay on private cars, as they're exempt, unless you've ever used it for business.
Wasting assets, defined by HMRC as items with an expected life of 50 years or less, are also exempt from the tax. This includes antique clocks, caravans, pleasure boats and most wine. But some fine wines that can be stored for long periods may be classed as taxable.
The standards by which HMRC decides whether assets are or aren't wasting assets can be tricky to understand, so it's a good idea to take advice if you're selling something valuable and aren't sure.
What is my taxable gain for CGT?
If you sold the item for more than £6,000, you'll need to calculate your CGT liability, which may or may not be covered by your annual allowance.
You calculate your gain by taking the sale price, and deducting what you bought it for, as well as any costs you incurred while buying or selling.
These may include professional valuations and auction fees. You aren't allowed to deduct finance costs if you borrowed to buy it in the first place.
You can also deduct the costs of any work you've done to improve it, but not to maintain or repair it.
Note that when selling sets of items, such as furniture or antique chess sets, the calculation is based on the collection as a whole, rather than each individual item.
CGT for gains between £6,000 and £15,000
Special rates apply to sales worth between £6,000 and £15,000.
The taxable amount is calculated as the lower of your actual gain, or you subtract £6,000 from what you sold it for, and multiply that by 5/3.
Say, for example, you sell a painting for £15,000 that you originally bought for £5,000.
You can either decide to use the £10,000 gain to calculate CGT.
Or, you can opt for 5/3rds of £9,000 (your £15,000 sale price, less £6,000). This works out as £15,000. So in this case, you'd opt for the standard way of working out a gain.
Are other taxes charged on personal possessions?
There are a number of other taxes you may pay on your possessions.
Most obviously, you'll often pay VAT when buying things, which is charged at 20% on most items.
And if you're actively buying items to sell later, such as on eBay, you may need to register for VAT if your trading levels are high enough.
If you derive an income from buying and selling goods, this may also be subject to income tax.
However, since April 2017 a new personal trading allowance has been in effect, allowing you to earn £1,000 in a tax year without needing to pay any tax or declare the income to HMRC.
Find out more: self-employed VAT return