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A Guide to Capital Gains Tax

Capital Gains Tax (often referred to as CGT) is the tax applied to the profit you make when you sell an asset that has increased in value since purchasing it. This applies to property that isn’t your main home, stocks and bonds, business assets, precious metals, and most personal possessions worth £6,000 or more (excluding your car).

How much is Capital Gains Tax?

CGT only applies to the profit you make when selling an asset, which is 28% on residential property and 20% on other chargeable assets if you’re either a business or an individual who pays the higher rate of Income Tax.
If you’re a basic rate taxpayer, your CGT rate will depend on the size of the gain, which is after your Personal Tax Allowance. For help working out how much you owe, get in touch with the tax specialists at TreyBridge Accountants.

An example of Capital Gains Tax

To help provide an idea of how much CGT you may owe, the Government’s website gives a good example: You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).
If you’re a higher rate taxpayer, you’ll need to pay 20% Capital Gains Tax on £20,000, which is £4,000.

Disposing of an asset

The terminology HMRC uses when it comes to Capital Gains Tax is “disposing of” an asset. This includes selling it, giving it away as a gift, transferring it to someone else, swapping it for something else, or receiving compensation if it’s been lost, stolen or destroyed.

Reporting capital gains

As with any other form of income or profit, capital gains need to be reported to HMRC. To do this, you’ll need the following:

• calculations for each capital gain or loss
• details of how much you bought and sold each asset for
• the dates when you took ownership and disposed of each asset
• any other relevant details, such as the costs of disposing of an asset and any tax reliefs you’re entitled to

When do I need to report capital gains?

In most cases, you need to report your capital gain by 31st December in the tax year after you made it. For example, if you made a gain in the 2021 to 2022 tax year, you need to report it by 31st December 2022.

Property sales in the UK on or after 6th April 2020
In some instances capital gains need to be reported very quickly. If you sell a property in the UK on or after 6th April 2020, you must report and pay any tax due within 30 days of completing the sale.

Penalties for late submission

If you fail to report capital gains on UK property within 30 days, you will likely have to pay interest and may also face a penalty from HMRC. This will cut into your profits, potentially quite heavily, so time is very much of the essence.

Help with Capital Gains Tax

Aaron Gilmore is the owner of TreyBridge Accountants, which supports businesses large and small across the UK. If you require tax consultancy or tax management, get in touch with him today for a free consultation.