Capital Gains Tax on Personal Possessions

Capital gains Tax (CGT) applies when you sell or dispose of personal possessions, but HMRC provides a useful exemption for items worth up to £6,000. Understanding these rules can help you work out whether you need to report a disposal and pay tax on valuable items like artwork, antiques, jewellery, or collectibles.

What counts as a personal possession?

Personal possessions are technically called 'chattels' in tax law. A chattel is a movable physical object you can touch and move around. This includes items such as:

• Paintings and other artworks
• Antiques and furniture
• Jewellery
• Coins and stamps
• Books and manuscripts
• Vintage cars
• China and ornaments
• Other collectibles

The key point is that chattels are tangible (physical) and moveable, which distinguishes them from property or land.

The £6,000 exemption

You don't pay CGT when you sell a personal possession for £6,000 or less. This threshold applies to each individual item, not to your total disposals for the year.

This means you can sell multiple items throughout the tax year, and as long as each one sells for £6,000 or less, you won't have any CGT to pay on those disposals (regardless of what you originally paid for them).

The £6,000 threshold covers both the proceeds you receive and the original cost. If both figures are £6,000 or less, the item is exempt from CGT.

When you do need to pay CGT

You may need to pay CGT when you sell a personal possession for more than £6,000 and you've made a gain (meaning you sold it for more than you paid for it).

To work out your gain:

1. Take the amount you sold the item for (the disposal proceeds)

2. Deduct what you originally paid for it (the acquisition cost)

3. Deduct any allowable costs like auction house fees or valuation costs

However, special calculation rules apply to keep the system fair when values are close to the £6,000 threshold.

When disposal proceeds exceed £6,000 but cost was less

When you sell an item for more than £6,000, but you originally bought it for less than £6,000, your chargeable gain is limited. You calculate the gain using the normal method, but the maximum chargeable gain is capped at:

5/3 × (gross proceeds minus £6,000)

This formula prevents you from paying excessive tax on items where the sale price is only just above the threshold.

When both cost and proceeds exceed £6,000

If you bought an item for more than £6,000 and sold it for more than £6,000, you calculate your gain (or loss) in the normal way. The £6,000 exemption doesn't apply, but you can deduct the full cost and any allowable expenses from your sale proceeds.

Claiming losses on personal possessions

If you sell a personal possession for less than you paid for it, you've made a loss. However, you can only use this loss to reduce gains on other personal possessions - you cannot offset it against other types of capital gains (such as gains from property or shares).

When claiming a loss, if the item originally cost you more than £6,000, you must restrict the allowable cost to £6,000 for the loss calculation. This means the maximum loss you can claim on any single chattel is limited.

Sets and collections

HMRC treats a set of matching or similar items as a single asset if they're worth more together than separately. Examples include:

• A set of matching dining chairs
• A collection of books forming a complete set
• A pair of ornamental vases

If you bought items as a set, they must be treated as one asset. If you sell the items from a set separately, or to the same person in a series of transactions, HMRC may still treat them as a single disposal and apply the £6,000 threshold to the set as a whole, not to each piece.

Wasting assets

Some personal possessions are 'wasting assets', meaning they have a predictable useful life of 50 years or less. Most wasting chattels are exempt from CGT completely.

This exemption covers items such as:

• Boats and caravans
• Antique clocks and watches (these are considered wasting assets as mechanical items)
• Most vintage cars

However, this exemption doesn't apply if you've used the asset in a business and claimed capital allowances on it.

What's always exempt from CGT

Certain personal possessions are exempt from CGT regardless of their value:

• Your car (mechanically propelled road vehicles suitable for private use)
• UK currency (sterling)
• Foreign currency obtained for personal spending abroad
• Betting and lottery winnings
• Compensation payments (in some circumstances)

Business use of personal possessions

If you use a personal possession in your business and claim capital allowances for it, different CGT rules apply. The wasting asset exemption won't be available, and you may need to calculate a balancing charge when you dispose of the item.

Reporting and paying CGT

If you need to pay CGT on personal possessions, you must report this through Self Assessment. The gain counts towards your total capital gains for the year, and you can use your annual CGT exemption (£3,000 for the 2025/26 tax year) to reduce the taxable amount.

CGT rates for the 2025/26 tax year are:

• 18% for basic rate taxpayers
• 24% for higher and additional rate taxpayers

These are the rates that apply to chattels and most other assets (except residential property, which has different rates).

Sources

• Personal possessions and Capital Gains Tax (Self Assessment helpsheet HS293)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.