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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am a UK citizen, UK resident, 67 years old, unemployed and

Resolved Question:

I am a UK citizen, UK resident, 67 years old, unemployed and not eligible for pension or benefits because I always lived and worked abroad. If I sell a painting which was a gift from the artist and which I have owned for 40 years, how much tax will I have to pay? It is valued as c.£30000. Thank you!
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

A painting is classed as a chattel, a personal possession for tax purposes and any gain is covered by the chattels rules which you can read about here.

If the painting sells for £30,000, then the normal CGT rules (not the chattels rules) apply. You deduct the purchase price or the the March 1982 value if it was bought before then from the net of sale expenses proceeds to arrive at the gain or loss. If there is a gain, you then deduct the annual CGT exemption of £10,900 from the gain and that leaves you with either the net taxable gain or no taxable gain.

There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the level of your income in the tax year of disposal of the property. Assuming you sell the painting in the 2013/14 tax year, the following will apply:

1 If your income in 2013/14 including the taxable gain is £41,450 or less, then all the taxable gain will be taxed at 18%.

2 If your income in 2013/14 excluding the taxable gain is more than £41,450, then all the taxable gain will be taxed at 28%.

3 If your income in 2013/14 excluding the taxable gain is less than £41,450 but more than £41,450 when you include the taxable gain then part of it will be taxed at 18% and part at 28%.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.
Thank you! That was really helpful. But can I ask you one more question? The painting has been wandering round the family for years and has never to my knowledge been bought or sold. How does one calculate the base line for capital gains? When the artist gave it to my relative in the 30s? When I let my son have it for his room in college 7-8 years ago? Some point in between? None of these transactions were formal - but the point in time chosen would make a big difference to the tax. Thank you again! And yes, sure "excellent".
Expert:  TonyTax replied 3 years ago.
Assuming the painting has always been yours since March 1982 or before, the March 1982 value is your "cost" for CGT purposes. You really don't want to get into a situation where your son "owned" it because that would be a disposal from you to him and then a disposal by him to you with potential CGT consequences when all that really happened was you lent it to him.

You need to try to get a valauation of the painting as at 31 March 1982, preferably from an expert. That value will be your "cost" for CGT purposes.
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