Decluttering uncovered: will I need to pay any tax on my treasures?

Having a clear out can yield some exciting surprises, turning up long-forgotten treasures that might be worth a decent amount of money.

But before you decide to sell that antique furniture or vintage jewellery, it’s important to find out if there’s a different kind of surprise: whether there will be any tax to pay.

Selling your treasures may not be as simple as the TV shows make out, as you could be liable for Capital Gains Tax (CGT), which applies to assets which have increased in value.

Each asset's tax liability is influenced by factors like the item's nature, its ownership history, and the specifics of the transaction,” explains Shaun Moore, tax and financial planning expert at wealth management firm Quilter. “Understanding these nuances is essential for anyone in possession of valuable items, be they inherited family heirlooms, personal collections, or investment pieces.”

It can be complicated, but the good news is that, firstly, CGT will only be charged on higher value items and secondly, everyone can enjoy some gains each year before needing to worry about tax.

Will I need to pay tax?

CGT is a tax that you pay on the gain (or profit) you make when selling an asset (in tax-speak, you will see this referred to as ‘disposing’ of said asset).

As well as things like property and investments, this also includes moveable items that you have in or about your home, such as paintings, antiques or jewellery. These are referred to (once again in tax-speak) as ‘chattels’ and are generally what covers the things we're talking about here.

However, it is important to point out that there are some exceptions. Your own car, for example won’t ever be subject to CGT, and, importantly, it depends how much you actually sell your chattels for.

Guy Sterling, a tax partner at Moore Kingston Smith says: “There is special relief for chattels, and disposals only need to be reported if the proceeds from the sale of an individual item exceeds £6,000.”

You also don’t need to pay CGT on so-called ‘wasting assets’. These are items such as mechanical devices- for example, vehicles or antique watches and clocks - that are deemed to have a lifespan of 50 years or less, which means their value should decrease should over time. 

So, if you find a Tompion clock or a brace of Purdey shotguns in your attic, you’re not only very fortunate, but you also won’t need to worry about tax.

In addition to these exceptions, everyone also has a CGT allowance each year that defines how much they can make through sales before paying tax. Currently this is £6,000, but it is scheduled to drop to just £3,000 on April 6, 2024.

Find out what your treasures are worth

Once you have made the decision to sell an item and you think it could be taxable, it’s worth making a note with a description of the piece, the date you bought or inherited the item and an estimation of its worth at that point in time.

You will also need to know what it is worth now. You can often get a good idea online, but for rarer or more valuable finds, you might need to get a professional valuation before selling to avoid a nasty surprise.

It’s worth using a reputable source, and things like the British Antique Dealers’ Association website let you search for members in your area.

The reason for doing all of this is CGT will only apply to your gain – the difference between the value of the item when it came into your possession and it current value. You might hear this referred to as your 'chargeable gain'.

Note that sets, like a pair of candlesticks or a collection of chessmen, need to be valued as one item.

How much tax will I need to pay?

If you are lucky enough to sell your item for more than £6,000 and your gain (on this item and any other assets you have sold in the current year) is more than the value of your allowance, then it is likely that you will have to pay some CGT.

You'll need to work out how much tax needs to be paid - HMRC has guidance on how this is calculated, depending on the amount the item goes for, as if you sell something for between £6,000 and £15,000, you’ll need to calculate something called the ‘maximum chargeable gain’.

How much you pay depends on your income tax rate. If you are a basic-rate taxpayer, you pay 10%, while higher-rate taxpayers pay 20% (just so you know, the rates are different if you are selling property).

However, for those on the basic rate, it can get a bit confusing. If the value of your gains pushes you into the higher rate tax bracket, you will also have to pay CGT at the higher rate. If you're unsure about any of this, HMRC suggests talking to a tax advisor to help.

You will need to declare your gain to HMRC and pay any tax that you owe. This can be done on your tax return, or if you aren’t registered for self-assessment, you can report it using HMRC’s real time service - note here that you must report by 31 December in the tax year after you made your gain and pay by 31 January.

Other tax traps

Nick Sinclair-Wilson, from BRI Wealth Management, says many of his clients end up keeping their treasuries, rather than selling them for a profit, because they have sentimental value.

But he warns, that doesn’t necessarily mean there won’t be any tax to pay. “This can have knock-on implications,” he explains. “When you die, these items would then be included in your taxable estate and your beneficiaries may end up paying inheritance tax — and potentially being forced to sell up to pay the bill.”

You might also consider gifting the treasure to your children or grandchildren. This means that the item would be exempt from inheritance tax providing you live for seven years.

However, Sinclair-Watson warns that you may still end up paying if you receive these gifts, because you don’t only pay CGT when you sell an asset, but being given assets can also land you with a tax bill based on the ‘market value’ of the item at the time you received it.

So if you do find yourself being given something that you may want to sell one day, then it’s worth checking out the market value as soon as possible to help you make that decision later on.

Time to get started

So, you’ve decided that it’s worth selling something you no longer want around the house – but you’re now wondering if it’s worth the hassle.

While the tax rules can be complicated, remember that you only need to declare items that are sold for more than £6,000, and you’ll only start paying tax on your capital gains if you make an annual profit of more than £6,000 (or £3,000 from April 2024). Again, if you’re at all unsure, it’s best to talk to a tax advisor for a simple check.

For most of us, this is the sort of cash we can only dream of when we first start sifting through the treasures lying around our homes.

So, take a good look at any valuables you might have or open that old chest of family heirlooms — you never know what you might find, and you can carry on knowing how to avoid a tax bill down the line.