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.
Whether you'll pay tax when selling possessions depends on the profit you make when selling it.
If your gain is less than £6,000, you won't pay anything. If it's more, you will probably face a bill.
Get a headstart on your 2017-18 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 £11,700 total (which is the personal CGT allowance for 2018-19), you won't need to pay anything.
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 your gain is more than £6,000, you'll need to pay capital gains tax.
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, 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 capital gains between £6,000 and £15,000.
The taxable amount is calculated as the lower of your actual gain, or five-thirds (166%) of the difference between your gain and £6,000.
Effectively, the rule gives you a CGT discount on gains up to £15,000.
Say, for example, you sell a painting for £15,000 that you originally bought for £5,000.
Your actual gain is £15,000 - £5,000 = £10,000.
Under the special rules, your taxable gain is 5/3 of the difference between your actual gain and £6,000.
£10,000 - £6,000 = £4,000
5/3 of £4,000 = £6,666.
So, your taxable gain will be considered £6,666 instead of £10,000.
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 allowance has been in effect, allowing you to earn your £1,000 in the tax year, you won't need to worry about it.
Find out more: self-employed VAT return