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Chattels: To tax or not to tax!

Shared from Tax Insider: Chattels: To tax or not to tax!
By Moneeza Siddiqui, October 2023

Moneeza Siddiqui looks at the capital gains tax rules for chattels, including the partial exemption for non-wasting chattels. 

There are specific tax rules for a category of assets termed as ‘chattels’.  

Unboxing chattels 

Chattels are defined as ‘tangible, moveable property’. Examples include furniture, antiques, paintings, jewellery, motor cars, plant and machinery, etc., but motor cars are exempt. 

The predictable useful life of chattels, estimated according to the type of asset and its intended use when acquired, determines the tax rules applicable. 

Wasting assets exemption and exception 

Chattels with a predictable useful life of 50 years or less are wasting assets and are exempt. Investing in such assets can be effective tax planning, but the drawback is that no relief can be claimed for any loss arising from the disposal of them. 

The exception is when the wasting asset has been used in a trade or business and capital allowances have been claimed on it. A gain on its disposal will be included in the tax return, but a loss will be restricted to account for the capital allowances claimed. 

Example 1: Loss on a wasting asset disposal  

A wasting asset worth £14,000 is purchased for use in a trade. Over a period of four years, capital allowances of £5,300 are claimed on it, before it is disposed for £8,700.  

The loss of £5,300 will be assumed to be covered by capital allowances and reduced to zero. The taxpayer will not be able to claim any additional relief. 

Non-wasting assets and the £6,000 threshold 

Chattels that have a useful life of more than 50 years, such as antiques, paintings, etc., are considered to be non-wasting.  

The amount of £6,000 plays a major part in the tax treatment of these chattels, as summarised in the table below (TCGA 1992, s 262): 

Purchase Cost 

Sale Proceeds 

≤ £6,000 

> £6,000 

≤ £6,000 

Exempt 

Chargeable gain is lower of: 

  1. Normal computation: gross disposal proceeds – cost 

  1. The ‘5/3 rule’: (Gross disposal proceeds - £6,000) x 5/3 

> £6,000 

Restrict loss by substituting gross disposal proceeds with £6,000 

Regular gain/loss computation 


Moving on from the more straightforward scenarios where both the cost and proceeds of the chattel are less than or greater than £6,000, let’s look at the technicalities surrounding the two remaining possible scenarios.  

Chattel bought for less than or equal to £6,000, sold for more 

The taxpayer makes a gain on this disposal, but two gains are calculated and the lower one is taxed. 

Example 2: Gain on disposal of a non-wasting chattel  

An antique table bought for £3,700 is sold for £7,200. Two gain amounts will be calculated:  

  • Normal computation: £7,200 - £3,700 = £3,500 

  • 5/3 rule: (£7,200 - £6,000) x 5/3 = £2,000 

The lower of the two (£2,000) will be treated as the taxpayer’s chargeable gain from the disposal.  

Chattel bought for more, sold for less than or equal to £6,000 

This is a loss-making scenario, but the taxpayer is required to substitute the actual gross disposal proceeds of the chattel with £6,000. 

Example 3: Loss on disposal of a non-wasting chattel  

If jewellery worth £8,500 is sold for £4,300, the taxpayer will make a capital loss relief claim for only £2,500 (£6,000 less £8,500) instead of the actual £4,200 (£4,300 less £8,500). 

The ‘sets’ restriction 

Care is required when dealing with chattels that are part of a set. Similar chattels that are complementary and are worth more together than separately (e.g., a collection of books by the same author) form a set.  

If the sale of the parts is made to the same person or group, the £6,000 limit will apply to the set rather than individual parts sold. An exempt disposal could therefore become chargeable. 

Practical tip 

Disposals of non-wasting chattels under joint ownership could become exempt as each owner is entitled to their own £6,000 limit. 

Moneeza Siddiqui looks at the capital gains tax rules for chattels, including the partial exemption for non-wasting chattels. 

There are specific tax rules for a category of assets termed as ‘chattels’.  

Unboxing chattels 

Chattels are defined as ‘tangible, moveable property’. Examples include furniture, antiques, paintings, jewellery, motor cars, plant and machinery, etc., but motor cars are exempt. 

The predictable useful life of chattels, estimated according to the type of asset and its intended use when acquired, determines the tax rules applicable. 

Wasting assets exemption and exception 

Chattels with a predictable useful life of 50 years or less are wasting assets and are exempt. Investing in such assets can be effective tax planning, but the drawback is that no

... Shared from Tax Insider: Chattels: To tax or not to tax!