19/07/2024
Capital Gains Tax (CGT)
What is Capital Gains Tax (CGT)
CGT is the tax made on the gain on the sale of a chargeable assets. This is calculated on the difference between proceeds and the costs paid for an asset. CGT is also due when an asset is gifted. HMRC would base the proceeds on the market value/arm’s length value of the asset in question.
Costs paid for an asset include the initial purchase, enhancement expenditure during ownership (e.g., making an extension to a building) and the costs associated with purchasing and selling an asset (e.g. legal fees).
The chargeable gain is reduced by an individual’s annual allowance of £3,000.
What is the Rate of CGT
For chargeable gains that fall within an individual’s basic rate band, the rate of tax is 10%, gains that fall within the higher rate tax band are taxed at 20%.
For residential properties, the basic rate of tax on the gain is 18% and 24% for the gains that fall in the higher rate.
Certain business assets can potentially qualify for Business Asset Disposal Relief (BADR). This means the whole gain could be taxed at 10%.
How is CGT reported
Chargeable gains are usually reported on an individual’s Tax Return in the year which they arose. This needs to be reported by the 31 January following the end of the tax year, the CGT is also due by this date. For example, suppose an individual sold an asset in July 2024, it will need to be reported on their 2024-25 Tax Return. The Tax Return and CGT would be due by 31 January 2026.
For residential properties subject to CGT the disposal and the CGT return due must be reported to HMRC within 60 days of sale. This is done by completing a CGT return.
Non-UK residents are also required to report disposals of non-residential properties and pay the CGT due within 60 days of sale.
Please contact 023 8046 1237 or email Joe Wilson if you would like more information on the above.
;