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Capital gains tax (CGT) is charged on the net gains (proceeds less cost) made on the sale of assets by individuals, personal representatives and trustees. Companies do not pay CGT but they are charged to corporation tax on net gains made.

Charge to CGT
A UK resident and domiciled property investor is liable to CGT where:

• A property is sold at a higher price than the original purchase price wherever situated in the world.
• A property or part of a property is transferred to an individual who is not the transferor’s spouse/civil partner.

Non-domiciled persons are liable to CGT on UK assets and on gains brought into the country (known as the ‘remittance basis’).

Calculation of the tax

• Gains (or losses) are calculated separately for each asset.
• The net gains/losses for each property sold in a tax year are totalled and if the overall gain exceeds the annual exempt amount (£11,000 for individuals in 2014/15), the balance is taxed at the taxpayer’s highest rate of tax applicable to capital gains (i.e. for individuals at 18% for any amount falling within the basic rate band and 28% for any surplus; the rate is 20% for most companies).
• A disposal may give rise to a gain or loss.
• The most common exemption is the main Principal Private Residence exemption.