What Is Capital Gains Tax, How and When to Pay It 2024

When is the Capital Gains Tax deadline?

You must report by 31st of December in the tax year after you made your gain and pay by 31st of January. For example, if you made gains on investments that are subject to Capital Gains Tax (CGT) in the 2023 to 2024 tax year, you need to report it by 31st of December 2024 and pay by 31st of January 2025.

In this article, we’ll explain what CGT is, if and when you’re liable to pay it, and how much you’ll pay

What is Capital Gains Tax?

Capital Gains Tax is a tax applied to profits made from certain investments. We say ‘certain’ because not every type of investment and investment account is subject to CGT.

If you have a General Investment Account (GIA) then any profits you make that take you over the Capital Gains Tax Allowance will be subject to CGT and must be reported. However, profits and investments held in an ISA or a Stocks and Shares ISA, are protected against CGT, as long as they’re within the £20,000 annual limit.

Note: you have to pay CGT on some other things too. View more information on the gov.uk website.

What is the Capital Gains Tax Allowance? 

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Just like with your regular income, you get a tax allowance for your capital gains (the profits on your investments). You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above the annual exempt amount.

This allowance is £3,000 in the tax year 2024/2025 (a UK tax year runs from 6th of April to the following 5th of April. Therefore, the 2024/25 tax year starts on 6th of April 2024 and finishes on 5th of April 2025). If your capital gains fall below this allowance, then there’s no need to report to HMRC. 

For example: You invest £3,000 in a GIA and it gains by 10% making your holding worth £3,300. You sell your shares and now your capital gain is £300. The £300 you’ve gained may be liable for Capital Gains Tax, if, when added to your other taxable gains* for that year, the total is more than £3,000. However, we also need to factor in capital losses. 

*Other taxable gains can include stock market investments, as well as profits from the sale of property, art, and jewellery.

What are capital losses?

Capital losses count when considering your overall capital gains for a year, and whether you need to pay tax.

For example: You make a profit on one investment of £4k and a loss on another investment of £2k. Your net capital gain is £2k, keeping you below the Capital Gains Tax allowance of £3,000, meaning there’s no need to report to HMRC.

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How much CGT will I pay?

The rate of Capital Gains Tax you pay on chargeable assets depends on your income taxpayer status:

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‍How can I minimise Capital Gains Tax?

One of the most popular ways of protecting profits against tax is with a Stocks and Shares ISA. This is because most profits made within a Stocks and Shares ISA are realised tax-free. 

Certain stocks and transactions might be subject to local fees, and you’ll still pay stamp duty on UK stocks (taken at the point of sale) but with a Stocks and Shares ISA you don’t need to worry about the £3,000 allowance.

You can pay up to a maximum of £20,000 into a Stocks and Shares ISA in the 2024/25 tax year.

You can have as many different types of ISA as you like (as long as you meet the eligibility criteria for each type, and with the exception of Lifetime ISA). Since the 6th April 2024, you can have subscriptions to multiple ISAs of the same type in the same tax year. This means that there is no longer a restriction on how many ISAs of each type you can utilise in a year, so for example, you could pay into two of the same type of ISA, as long as the total amount does not exceed the £20,000 limit. You can save up to £20,000 in one type of account or split the allowance across some or all of the other types.

Please note, tax treatment depends on the individual circumstances of each client and may be subject to change in future. Your capital is at risk when you invest.

For more, see our articles on Tax Allowances and the benefits of Long-Term Investing.