In the last three months of 2024, we paid £808 million in CGT. That’s up 60% in a year. Over the entire year, CGT is up 13% according to figures earlier this month.

CGT isn’t just paid on stocks and shares and investment property, it can be paid on crypto or valuable things you sell on sites like eBay.

And it’s not just paid when you sell, it can be due if you give things away, or use crypto to buy things.

Capital gains tax is the Luke Hemsworth of tax threats. It’s far less well-known than its tax siblings, and yet carries some serious muscle. It has been in the spotlight more since the slashing of the tax-free allowance and the upping of the rate on non-property assets, but there’s still the chance it has slipped under the radar.

There are seven things you need to know about capital gains tax in order to avoid being landed with an unexpected bill out of the blue.

1. The tax-free allowance has fallen significantly in recent years

The cuts have been swift and dramatic. In 2022/23 you could realise a gain of £12,300 and pay no CGT, just two years later, the allowance is £3,000. It means more people face paying more of this tax, and some people are being exposed to it for the first time.

2. The rate has risen

October’s Budget hiked the rate on stocks and shares and other non-property assets from 20% to 24% for higher rate taxpayers and from 10% to 18% for basic rate taxpayers. For couples who arrange for the bulk of taxable gains to be made by a lower earner, this was a particularly painful hike.

3. You may pay it on things you give away

People usually associate making a capital gain with selling an asset, but if you give it away to anyone other than a spouse or civil partner, the gain it has made since you bought it will normally be assessed for capital gains tax purposes. If you give away assets with gains of over £3,000, there will usually be tax to pay. If you give it to a spouse or civil partner, there’s no tax on the transfer, but when they come to sell it, their gain will be calculated from the date you acquired it.

4. If you sell something for less than it’s worth, you have to pay more than you think

Some people hope to get around capital gains tax by selling something for less than it’s worth – such as a second property. However, in these circumstances, capital gains tax will be due on the full market value. 

5. You may pay it on crypto – including if you spend it

This can be easily overlooked, because initially crypto was conceived as a new way of spending money. However, because speculation has meant the value can change so much, you could be spending assets which have gained significantly in value, and because this is counted as disposing of them, it can trigger a tax bill. It means you need to be certain about when you acquired the assets and how much they have gained in value since then – and keep good records.

6. You may pay it on things you exchange for something else

This includes two people exchanging second properties – it doesn’t get around the CGT bill. It also includes someone swapping one type of crypto for another.

7. You may pay it on things you sell on sites like eBay

If you’re not buying and selling to make a profit, you don’t need to worry about paying income tax on your profits. However, if you sell something worth £6,000 or more and make a gain of more than £3,000, you may have to pay capital gains tax. This includes things like jewellery, paintings and antiques. It also includes sets of things – which will be valued together if they’re sold to the same person. However, it doesn’t usually include cars or things with a limited lifespan like clocks.

You can beat Capital Gains Tax

Make use of your CGT allowance every year, before you lose it

Higher rate taxpayers pay 24% on capital gains on investments and 28% on gains from property. In the current tax year, you can make gains of £3,000 before you pay tax on them. 

Offset losses against gains

Don’t forget, you can offset any capital losses you make during the tax year against gains. If your total taxable gain is still over the tax-free allowance, you may be able to deduct any unused losses from previous tax years. If just some of your losses reduce your gain to below the tax-free allowance, you can carry forward the remaining losses to a future tax year.

Shelter as much of your portfolio in ISAs as possible. 

If you have investments outside an ISA, you can use the Bed and ISA process (also known as Share Exchange) to move eligible assets into an ISA. Once in an ISA, you won’t pay tax on either gains or income. Because the dividend tax rate is generally paid at a higher rate than the capital gains tax rate, it’s often worth prioritising income-producing investments when making decisions about how to use your ISA allowance.

Plan as a couple

If you’re married or in a civil partnership you can transfer investments into their name without triggering CGT, so you can both take advantage of your allowances. 

Consider a Venture Capital Trust 

These aren’t right for everyone, because they are very high risk, so should only be considered as part of a large and diverse portfolio. However, if you use these schemes, they are CGT free and you can get up to 30% income tax relief on the amount you invest – which can reduce your overall tax bill.