CGT Calculator vs Inheritance Tax Calculator: What’s the Difference?
When it comes to managing wealth, investments, or estates in the UK, understanding the taxes that apply can feel complicated. Two of the most important areas people often confuse are Capital Gains Tax (CGT) and Inheritance Tax (IHT). Both can significantly affect your finances, but they apply in very different circumstances. That’s where online tools such as a CGT (Capital Gains Tax) Calculator and an Inheritance Tax Calculator become essential. These calculators take the stress out of working with percentages, thresholds, and allowances, offering quick and accurate estimates that help you plan.
While a CGT Calculator is designed for investors, property owners, and individuals selling assets, an Inheritance Tax Calculator is more relevant to estate planning and transfers of wealth after someone passes away. Knowing the distinction between the two not only saves time but also prevents costly mistakes. In this guide, we’ll break down how each calculator works, highlight their key differences, and explain why both play a crucial role in smart financial planning.
Capital Gains Tax vs Inheritance Tax Explained
In the UK, two major taxes often linked to wealth and assets are Capital Gains Tax (CGT) and Inheritance Tax (IHT), but they apply in very different ways. Capital Gains Tax is charged when you sell or dispose of certain assets, like property (excluding your main home), shares, or valuable personal items,and make a profit above the annual allowance. For example, if you bought shares for £10,000 and later sold them for £18,000, the £8,000 gain could be subject to CGT. The exact amount depends on your income band and the type of asset. This is where a CGT (Capital Gains Tax) Calculator becomes useful, as it quickly estimates how much tax you might owe after allowances and reliefs.
Inheritance Tax, on the other hand, applies when someone passes away and their estate exceeds the tax-free threshold (currently £325,000 for most estates). Transfers between spouses or civil partners are usually exempt, but other beneficiaries may face a 40% charge on anything above the threshold. An Inheritance Tax Calculator helps families plan, ensuring wealth is passed on in the most tax-efficient way. Together, CGT and IHT shape how individuals and families manage their assets during life and after death.
How CGT and IHT Affect Financial Planning?
Although Capital Gains Tax (CGT) and Inheritance Tax (IHT) are applied in different scenarios, they are both crucial parts of long-term financial planning. CGT comes into play while you are alive, typically when selling assets like shares, rental properties, or other investments. IHT, meanwhile, becomes relevant when your estate is passed on to beneficiaries after death. The connection between the two lies in how wealth is managed across a lifetime.
For example, selling assets before death may trigger CGT, but holding onto them could lead to IHT for your heirs. This makes it important to carefully balance decisions between selling, gifting, or holding assets. Using a CGT Calculator allows you to estimate the tax impact of selling, while an Inheritance Tax Calculator helps you plan for efficient estate transfers. By understanding how both taxes work together, individuals and families can reduce liabilities and make informed choices to protect wealth for the future.
Using a CGT Calculator for Investors
For investors, property owners, and individuals selling valuable assets, a CGT (Capital Gains Tax) Calculator is one of the most practical tools available. Instead of manually working through tax bands, exemptions, and annual allowances, the calculator provides a quick estimate of how much tax you might owe after a sale. For example, if you sell shares, a second property, or other taxable assets, you first need to work out your gain, the difference between the selling price and the purchase price. This Calculator then applies the correct tax-free allowance and the appropriate rate based on whether you’re a basic-rate or higher-rate taxpayer.
This saves time and reduces the risk of making errors when calculating your liability. Investors also benefit from running multiple scenarios through the calculator before deciding whether to sell or hold an asset. By doing so, they can compare outcomes, plan sales in tax-efficient ways, and avoid unexpected bills. For quick access, you can try the tool directly here: CGT Calculator.
CGT Calculator vs Inheritance Tax Calculator
While both tools aim to simplify tax planning, their purpose and use cases are very different. Here’s a side-by-side comparison:
Feature | CGT (Capital Gains Tax) Calculator | Inheritance Tax Calculator |
Purpose | Estimatesthe tax owed on profits from selling assets | Estimates tax owed on estates passed after death |
When It Applies | During your lifetime, when selling property, shares, or investments | After death, when assets are transferred to beneficiaries |
Key Users | Investors, landlords, individuals selling assets | Families, estate planners, beneficiaries |
Tax-Free Allowances | Annual CGT allowance (set each tax year) | Nil-rate band (£325,000) and residence nil-rate band (if applicable) |
Rates | 10% or 20% (depending on income and asset type) | Standard 40% above thresholds |
Main Benefit of the Calculator | Quick estimate of CGT liability before selling | Helps plan estates efficiently and reduce IHT burden |
Why Both Matter for Business Owners?
For business owners, understanding the role of both CGT and IHT is essential for long-term financial security. Many entrepreneurs eventually sell their business or assets, which can trigger Capital Gains Tax. Using a CGT Calculator helps estimate how much tax will be due on the sale, making it easier to plan exits and reinvest profits wisely.
At the same time, business assets often form a significant part of an estate. Without careful planning, these assets could be subject to Inheritance Tax when passed on to family members. An Inheritance Tax Calculator allows business owners to see the potential liability and explore reliefs such as Business Property Relief, which can reduce the tax owed.
By combining both tools, business owners gain a clearer picture of how selling, gifting, or holding assets impacts their overall financial strategy. This not only helps protect personal wealth but also ensures a smoother transfer of business assets to the next generation.
Benefits of Using Online Calculators Over Manual Calculations
Working out tax by hand can be time-consuming and prone to mistakes, especially when dealing with complex rules, allowances, and varying tax rates. That’s why online tools such as a CGT (Capital Gains Tax) Calculator and an Inheritance Tax Calculator are so valuable. They simplify the process and deliver results within seconds. One of the biggest advantages is accuracy. Manual calculations often lead to errors, particularly when factoring in thresholds, exemptions, or different tax bands. Online calculators are updated with the latest HMRC rates, meaning you always work with current figures.
Another key benefit is speed. Instead of struggling with paperwork or spreadsheets, investors and families can get instant estimates and plan accordingly. Calculators also allow users to test different scenarios, such as selling now versus later, or gifting assets before death, helping them choose the most tax-efficient strategy. Most importantly, these tools reduce the stress and confusion that oftencomes with UK tax rules, giving people more confidence in their financial planning decisions.
Conclusion
Both Capital Gains Tax (CGT) and Inheritance Tax (IHT) play a major role in how individuals and families manage their wealth. While CGT applies during your lifetime when you sell assets at a profit, IHT comes into effect when passing on an estate after death. Understanding the differences between the two is vital to avoid unexpected liabilities. Online tools such as a CGT Calculator and an Inheritance Tax Calculator make this process much easier by providing fast, accurate estimates without the need for complex manual calculations.
They not only save time but also allow you to plan ahead, whether you’re selling an investment, preparing to pass on property, or managing business assets. By using both calculators together, you gain a clearer view of your overall financial picture, ensuring you make informed decisions today and protect your family’s future tomorrow. In a tax system as detailed as the UK’s, these calculators aren’t just helpful; they’re essential tools for smarter planning.
FAQs
Can I be liable for both CGT and Inheritance Tax on the same asset?
Not at the same time. CGT applies when you sell or transfer an asset during your lifetime, while IHT applies when assets are passed on after death. However, lifetime planning may involve considering both taxes.
Do online tax calculators give exact figures?
A CGT Calculator or Inheritance Tax Calculator provides accurate estimates based on current HMRC rules, but the final liability may vary depending on reliefs, exemptions, or changes in tax law.
Are there exemptions for CGT?
Yes, your main home (under most circumstances), certain personal possessions, and investments within ISAs are exempt from CGT. Allowances also reduce the amount of gain subject to tax.
Who typically uses an Inheritance Tax Calculator?
Families, estate planners, and beneficiaries use it to estimate potential liabilities and plan strategies for reducing IHT, such as making gifts or using exemptions.
How often should I check my tax liabilities?
It’s wise to use calculators regularly,before selling assets, when planning your estate, or when tax laws change,to make sure your financial planning stays up to date.