The capital gains tax rate in the UK is 18% as a basic-rate taxpayer and increases if you’re in the higher tax bracket. If you’re planning to sell your home or dispose of an asset, you’ll need to pay capital gain tax; if the situation is complex, you’ll need to hire a CGT advisor. Regardless, here are some things you should know.
What Is Capital Gains Tax?
First, you should understand capital gain tax to better understand its requirements and exemptions. Capital gains tax is a tax on the profit one obtains from disposing of an asset. The common situations include:
- Selling an asset
- Giving away an asset as a gift
- Transferring it to someone
- Exchanging it for another
- Receive compensation for it, like an insurance payout from a damaged asset.
Does Capital Gains Tax Apply To All Assets?
Most assets are liable to the capital gains tax when you sell or dispose of them. However, there are some that you won’t have to pay a tax on in certain cases. For example, stocks and shares, betting and lottery winnings, main home, and car are capital gains tax-free.
How To Calculate Capital Gains Tax
You need to calculate the gain or loss on each asset separately. Then, deduct any allowable costs for acquiring and disposing of an asset. Finally, combine all the gains and losses to work out the overall capital gains tax.
Are All Gains Taxable?
No, not all gains are taxable. There is an annual tax-free allowance; you’ll have to pay it only if the gains cross that threshold. Moreover, there are also other exemptions.
What Are The Exemptions On Gains?
Certain exemptions and reliefs for capital gains tax and any liabilities you may incur. The annual exempt amount for 2022/23 is £12,300. Gains up to this amount will be exempt. In addition, any gains on assets become exempt upon the owner’s death. The beneficiary of that asset is deemed to have acquired them at the probate value. Gains made on homes are also exempt.
If you have multiple properties you call home, you can nominate one of them as your main residence within two years of acquiring the property. If you don’t nominate it within the timeframe, the right goes to HMRC to decide which property is eligible for relief based on how much you use it.
How To Report A Gain Or Loss
HMRC usually sends a letter asking to complete a tax return when there is capital gain tax to pay. You can contact the local tax office if there is no letter and you’ve calculated that you must pay capital gain tax. Those that normally complete a self-assessment tax return can send the additional capital gain tax pages with the tax returns.
Looking for Capital Gain Tax (CGT) Advisors in London? IBISS & CO. can help!
Capital gains tax is a complicated subject. If you’ve never dealt with it before, it won’t be easy to subject to handle. Fortunately, there are professionals specializing in it, like IBISS & CO. We are a tax and accountancy firm that offers general and specialist services like accounting and tax consultants in London and Walsall. Our services include HMRC tax investigations, corporation tax, self-assessment tax returns, and capital gains tax. Our business and tax advice can help you take advantage of legal opportunities to pay less tax.
Contact us for tax accountant consultation in London and Walsall.