Tax exemptions for collectible items

Scope of capital gains tax

A question we’re often asked is what types of transaction can capital gains tax (CGT) apply to? The answer is the sale or transfer of any asset, whether physical, e.g. furniture, or non-physical, e.g. shares in a company, where its value is greater than when you acquired it. There are of course many exemptions and exclusions. In this article we’ll look at two of them in context of the question above.

The CGT annual exemption (£3,000 for 2024/25 and 2025/26) only applies to gains not covered by any other exemption or relief.

Two exemptions

When giving away or selling a personal item, e.g. a childhood toy, that’s worth more than when you acquired it, one of two exemptions can apply. They are the wasting assets exemption and the chattels exemption .

Wasting assets

The wasting assets exemption exempts 100% of the capital gain that it applies to. However, it only applies to assets that have an expected life of no more than 50 years. The expected life of an asset may be different depending on the reason why you acquired it. The following examples illustrate this.

Example 1. Harry has a collection of Pokémon cards which he acquired when he was young. The intended use was for playing games. In that scenario it’s reasonable to assume that their expected life was no more than 50 years. Therefore, the wasting assets exemption applies to any gain Harry makes from selling or transferring each card.

Example 2. Harry from our previous example sells his cards to a collector who intends to keep them indefinitely. It can be expected that the cards have a lifespan of more than 50 years as they will be preserved as collector’s items. This means that if the collector sells or transfers a card and makes a gain, the wasting assets exemption won’t apply.

Old toys are often collectible and gains made from selling them are within the scope of CGT. However, if they are mechanical toys, broadly if they have functioning moving parts, e.g. a toy car, the rules assume they have an expected life of no more than 50 years and so the wasting asset exemption can apply, with one exception.

The exemption doesn’t apply to mechanical items if they are used in a business and you could have claimed a capital allowances tax deduction for them.

Chattels exemption

The chattels exemption applies only to physical assets which are movable, e.g. a painting. Where you make a gain not covered by another exemption (ignoring the annual exemption), the transaction is exempt in full where the value of the item is no more than £6,000. Where the value exceeds £6,000 but is not more than £15,000, the amount liable to CGT is limited to 5/3rds of the excess value over £6,000.

Anti-avoidance rules prevent multiple chattels exemptions where you sell a set of items piece by piece, e.g. a chess set