What do I need to know?
Events giving rise to a capital gains are usually infrequent and are easily overlooked but most gains need to be reported on your self-assessment tax return.
If you are selling residential property in the UK you need to report and pay any CGT due within 60 days of completion. Checking the CGT position before you sell is an important step not to overlook otherwise there could be penalties and interest charges when a return is made late.
If you give away a capital asset you are treated as making a disposal at market value and could still have a tax liability, even if you receive no money for the asset.
Even if you make a loss on the disposal of an asset you could benefit from reporting the transaction so you can use the loss in the future.
Are there times when I don’t need to pay CGT?
There are a number of occasions and circumstances when you don’t need to pay CGT. Some assets are exempt altogether and the transfer of assets between spouse (or civil partners) who are living together are usually tax free, as are gifts to charities. There are also special reliefs for business assets and some trust arrangements as well as a range of tax breaks on particular ‘tax favoured’ investments such as the Enterprise Investment Scheme.
How can Albert Goodman help?
Working out your capital gain can be complicated, we can take away the worry of getting it wrong and we will also help you comply with the relevant reporting obligation, avoiding penalties and interest.
Letting us know about transactions as soon as you are planning them will help you stay in control and sometimes simple steps can be taken to reduce the tax payable. Our input will ensure you only pay the tax that is due and you claim all the reliefs which you might be entitled to.
Capital Gains Tax: FAQ's.
Will Capital Gains Tax Increase?
Capital gains tax rates have remained stable for many years and whilst there are often murmurs of increases, we are not aware of any definite plans to do so. However, the amount of tax payable on any particular capital gain does change for other reasons. For example, the annual exemption is reducing from £12,300 currently to £6,000 for 2023/24 and £3,000 for2024/25. This is the amount of capital gains which are tax free each year, so whilst the rate of tax hasn’t changed the amount on which you pay tax may well increase if you are over these limits.
Where is Capital Gains Tax calculated?
Capital Gains are added to your other income and additional pages are added to your self-assessment tax return. The amount of capital gains tax payable depends on the level of your income as well as the size of the gains so the figures all come together on your self-assessment tax return. If you don’t file a self-assessment tax return you have the option of reporting your gain online https://www.gov.uk/report-and-pay-your-capital-gains-tax. If you make a gain on selling UK residential property you will also need to file a Residential Property CGT return with 60 days of completion of the sale. It is your responsibility to calculate and pay the correct amount of tax at the right time.
Can Capital Gains Tax allowance be carried forward?
Each individual has an annual exemption for capital gains tax which can only be used in the tax year to which it relates. The exemption at the moment is £12,300 but reduces to £6,000 for 2023/24 and to £3,000 for 2024/25. This amount is set against your total gains for the tax year concerned but if the allowance is not used, it cannot be carried forward. Trusts can only claim half the normal annual exemption.
What Capital Gains Tax do I pay on shares?
Shares are subject to capital gains tax in the same way as any other asset. The gain is broadly the difference between the amount you receive when they are sold and the amount which you paid when you bought them. There are special rules to determine how that matching works if you buy or sell less than your whole holding of shares in a particular company. The amount of tax you pay will depend on the size of all of your gains in the tax year and the level of your other income in that year. The current rate of CGT on shares is 10% in so far as the gain is within your basic rate band and 20% thereafter. Not all investments are taxed in this way and there are special rules for ISAs, pensions, Government stock, corporate bonds and investment bonds, etc.
Who does Capital Gains Tax apply to?
Capital gains tax is paid by anyone, including trusts, who is resident in the UK in the tax year when the asset is disposed of. Generally, those who are not UK resident will not pay CGT in the UK but there are some exceptions. Non-residents who sell property situated in the UK will pay a limited form of CGT based on the increase in value since special rules were introduced in 2015 or 2019 depending on the type of property. Non-domiciled individuals may not pay CGT if they do not remit the gain to the UK. It is also possible to be subject to CGT on a gain realised whist you are non-resident when you return to the UK within 5 years. Limited Companies also pay tax on capital gains but at corporation tax rates.
Capital Gains Tax with no income?
The rate of capital gains tax you pay depends on the level of other income you have in the same tax year. If you have no income at all you can apply the whole of your basic rate band to your capital gains before you have to pay the higher rate of tax. Gains within the basic rate band are taxed at 10% (18% for residential property) and only the excess is subject to the higher rate of 20% (28% for residential property). Whether money you receive is a ‘capital gain’ or ‘income’ is a question of fact in your circumstances and HMRC cannot make you pay income tax on capital gains just because you have no income.
