What the taxman takes from a gain on collectable LEGO. For UK individuals, often nothing. Here is why.
£6,000
Sale price under which a chattel is generally exempt
Each set
Is a chattel in its own right
Almost all
Individual LEGO sets sell below it
Under HMRC rules, a tangible movable item, which the tax code calls a "chattel", is generally exempt from capital gains tax if it is sold for £6,000 or less. Each LEGO set is a chattel in its own right, and almost every individual set, even the rare and retired ones we buy, sells for well under that figure.
That puts a collection of sets in a different position from most investments. A gain on shares, funds or property above your annual exempt amount is taxed. A gain on a set sold for under £6,000 generally is not, however much it has risen. Ten sets bought for £300 each and sold years later for £2,000 each is a gain of £17,000 that, in the ordinary case, HMRC does not tax at all.
HMRC can treat several chattels as one for the £6,000 limit, but only if they are similar and complementary, are worth more together than separately, and are sold to the same buyer or to connected people.
In our experience LEGO rarely meets the second test. Each sealed box is valued in its own right, and a job lot of sets usually sells for less than the boxes would fetch one by one, not more. Even so, how you sell matters, and selling to one buyer in bulk is the case to take advice on.
The exemption applies to gains on assets you hold. Someone buying and selling sets frequently, as a business, could be treated as trading and taxed on income instead. A collection held for years and sold in an orderly way is a different thing.
Tax depends on your personal circumstances and rules can change. We do not provide tax advice, and nothing on this page should be relied on as tax advice. This reflects the specialist tax advice we have received and our understanding of the rules as they stand, but please do not rely on it: before making any decision, ask your own accountant or tax adviser to confirm both the rules and how they apply to you.