Capital Gains Tax (CGT) is a tax on the profit – or gain – you make when selling an asset. You do not have to pay CGT if your gains for the tax year are below your yearly tax-free allowance.
Contact our specialist Capital Gains Tax advisors to discuss the if we can reduce your Capital Gains Tax liability.
Alexander & Co – expert tax advice
Our expert tax accountants assist individuals and businesses with a wide range of capital gains tax issues. Some of the common scenarios we deal with for clients include:
- Assisting property investors looking to sell buy-to-let property
- Transferring properties to your children, or other family members in a tax efficient way
- Restructuring businesses
- Advising on Shares and Capital Gains Tax
- Capital Gains Tax advice for trusts
- Capital Gains Tax advice for non-UK residents
- Capital Gains Tax advice on overseas properties
- Offsetting Capital Gains Tax losses
Capital Gains made on the sale of a business, shares or a property often considerably exceed the available tax-free allowances. Here, careful planning and expert advice will ensure that transactions are structured as tax efficiently as possible. This will help to minimise any Capital Gains Tax that may occur.
What is the Capital Gains annual allowance?
The personal Capital Gains Tax allowance (CGT allowance) for the 2022/23 tax year is £6,000. This is a reduction from the previous tax year (£12,300). It is scheduled to reduce further in the 2024/25 tax year to £3,000.
This Capital Gains Annual Allowance is the amount of gains that an individual can make from the sale of their asset in any tax year, before being taxed. In certain circumstances, married couples can pool their allowances. For businesses and individuals, end of year tax planning is vital to ensure all available tax reliefs are utilised.
Capital Gains advice for individuals
We regularly advise individuals on their Capital Gains Tax liabilities. This can be from the disposal of personal possessions, shares or often the sale of a second property. Whether this be a buy-to-let property or where an individual has become an accidental landlord, through marriage or inheritance.
In ALL all cases, we provide expert advice on the most tax effective way to minimise an individual’s tax burden.
Capital Gains advice for Businesses
Our corporate team can advise businesses and shareholders on their Capital Gains Tax liability that may arise.
CGT may be due when profit is made when all or part of a business or its assets are sold. This can include:
- Land and buildings
- Fixtures and fittings
- Plant and machinery
- Registered trademarks
- Disposing/selling the goodwill of a company
Business Asset Disposal Relief
Business Asset Disposal Relief (formally known as Entrepreneurs’ Relief before 6 April 2020) reduces the amount of Capital Gains Tax paid when a business, or part of it is sold.
This relief reduces the Capital Gains Tax rate to 10% in qualifying circumstances.
In order to qualify for this relief, you need to be a sole trader or a business partner. You also must have owned the business for at least two years. These rules also apply when closing a business. The business assets must also have been disposed of within 3 years to qualify for relief.
Business Asset Disposal Relief for the sale of shares or securities
Business Asset Disposal Relief can also apply for the sale of shares or securities. To qualify, for at least two years up to the disposal date, you must be an employee or office holder of the company/group. The business also needs to be a trading company.
The business must be a personal company for at least 2 years before you sell your shares. For this to apply, you must have at least 5% of both the shares and voting rights.
In addition to this, you must also be entitled to at least 5% of either profits (available for distribution and assets on winding up the company) or the disposal proceeds if the company is sold.
In circumstances where the number of shares held falls below 5% (because more shares have been issued by the company), you may still be able to claim the relief. We can advise on this.
There are numerous rules surrounding the disposal of shares, including whether shares are from an Enterprise Management Incentive (EMI). This can be a complex area, as both voting rights and shares in a company need to be considered. We can provide advice on all these matters.
We can also advise on other scenarios. These can include if the company stops being a trading company and if you are selling assets lent to a business. If you are a trustee, you may also qualify as a trustee selling assets held in the trust.
Capital Gains and shares
Capital Gains Tax on shares is charged dependent upon your personal tax band, currently at either 10% or 20%.
Do I need to pay Capital Gains Tax on shares?
You will usually have to pay Capital Gains Tax on shares unless these are held in a pension or ISA. Capital Gains Tax may also be payable when selling investment trusts, funds, or other financial products at a profit.
Special Capital Gains rules for shares and unit trusts
When acquiring identical shares or units at different times, there is an assumption from HMRC that these are disposed of in a strict order.
Where this applies, you will need to understand which shares or units are being sold, for the tax bill to be worked out correctly.
Tax rules state that the shares or units being sold must be matched to those bought, in the same order.
Those purchased on the same day and those purchased within the subsequent 30 days are treated as being held in a pool. These are acquired at their average price.
There are other special rules that apply that we can advise on, including;
- Bed & Breakfasting and the 30-day rule
- Contract for Differences (CFD)
Capital Gains advice for landlords and property investors
Alexander & Co provides specialist tax and accountancy advice to many landlords and property investors. This includes advising on the Capital Gains Tax aspects of selling or disposing of assets, to structuring your company tax-efficiently. We frequently advise on the benefits and pitfalls of holding buy to let properties in a company versus personal ownership.
As a landlord or investor, there is a wide range of issues to consider to minimise tax and increase profitability. Our expert team is on hand to guide you through the complex legislation.
Capital Gains Tax on property
Many landlords and property investors are not familiar with how to offset Capital Gains Tax effectively. This often leads to tax bills much larger than they ought to be. Our expert tax advisors can advise on how to structure such disposals effectively, to minimise Capital Gains Tax bills.
Our expert tax advisors can advise on how to structure such disposals effectively, to minimise Capital Gains Tax bills.
There are several tax reliefs available to offset Capital Gains Tax on the disposal of properties. Whilst the applications of the rules can be complex, we have expert knowledge in this field and can advise you.
Private Residence Relief
Private Residence Relief (PRR) is currently available when you rent out a property that was once your main residence. PRR is available for the time you lived in it, plus a 9-month grace period prior to disposal. The latter is regardless of whether you lived in the property during this period or not. I applies even if it was rented out during this period. This 9-month period of grace was reduced from a previous 18-month period for sales occurring from 6 April 2020.
Applying this relief correctly can significantly reduce the CGT due when disposing of a property you once lived in.
Lettings Relief was a generous tax concession, which was significantly restricted from 6 April 2020. It is now only available for disabled persons, or those in a care home. Additionally, it is available when the owner of the property is in shared accommodation with a tenant.
In these circumstances, the relief is worth up to £40,000, per person, per property. Lettings Relief is available, in addition to Private Residence Relief, for properties that were once your main residence. The relief is the lower of the amount of PRR available in respect of the letting, £40,000, or the gain from the letting.
Capital Gains Tax on overseas properties
If you are a resident in the UK, you pay Capital Gains Tax when you dispose of overseas properties. If you are resident in the UK, but you are domiciled abroad, special rules can apply.
This can be a complex area of tax, which we regularly advise upon. In addition to paying UK tax, you may also have to pay tax in the country where the property is located. This could effectively mean paying tax twice. We can also advise if you are able to claim relief in this situation.
Capital Gains Tax on Residential Property
Since October 2021, CGT needs to be reported and paid to HMRC within 60 days of a residential property sale. Failure to do so may lead to penalties and interest charges. Prior to this, since 6 April 2020 there was a 30-day reporting requirement.
Capital Gains Tax for non-UK residents
If you are non-resident in the UK but return within 5 years of leaving, UK tax may be due on the disposal of overseas properties.
Capital Gains on inherited properties
You will pay Capital Gains on an inherited property when you sell it. This is in the same way that you would pay Capital Gains on any other property.
If the property is residential, you may be able to claim Private Residents Relief or Lettings Relief, as outlined above.
Notifying HMRC of your liability and paying
There are now two different ways in which you are required to report and pay Capital Gains Tax.
For UK residential property disposed since April 2021, reporting is different from any UK residential property disposed before this date.
Gains from a residential property sold since October 2021, need to be reported to HMRC within 60 days of disposal. (Prior to this, since 6 April 2021 the deadline was 30 days). A payment made on account (for the full amount) within the same time period.
A Capital Gains Tax on UK property account will need to be created before tax can be reported and paid.
Non-UK residents must also use this to report sales/disposals from 6 April 2020 of residential UK property and land as well as non-residential UK property/land, mixed use UK property/land as well as rights to assets that derive at least 75% of their value from UK land.
Non-UK residents must report all sales/disposals of UK property, regardless of whether there is a tax liability.
For UK residents reporting a residential sale before 6 April 2020, or reporting any other non-residential disposals, this is usually recorded in a self assessment tax return. For residential property sold before this date, this should have been reported by 31 January 2021 at the latest.
Capital Gains losses
If you make a loss on a chargeable asset, this can be reported to reduce your total capital gain.
When you make a loss, this amount is deducted from the Capital Gains made in that year. If the gain is still above the tax-free allowance; you can bring forward any losses made in previous years. You can also carry forward any remaining losses to utilise in future years.
Reporting Capital Gains losses
You can report a loss by including it on a self assessment tax return.
If you have never made a gain and are not required to register for self assessment, you can report this by writing to HMRC instead.
Losses do not need to be reported to HMRC straight away. These can be claimed up to four years after the end of the tax year in which the disposal occurred. (This is subject to certain exceptions)
Special Capital Gains rules
In certain circumstances, special rules apply to how HMRC deals with Capital Gains. These include Capital Gains on the following:
- When somebody dies
- For non-UK residents disposing of UK property or land
- For individuals who have temporary lived abroad as a non-resident
- On overseas assets for non-domiciled in the UK, if they have claimed under the remittance basis
- On income from shares in certain circumstances
In each of these situations, Alexander & Co can advise you.
How Alexander & Co can help
At Alexander & Co, all our tax accountants are fully certified. We provide expert advice to help minimise tax liability where possible and keep you on the right side of HMRC.
We offer an initial consultation to discuss your personal circumstances and are happy to provide you with a fee quote.
In addition to advising on Capital Gains Tax, we provide a comprehensive range of tax and accountancy services including:
- Buy to let accountancy and tax services for landlords and developers
- Stamp Duty Land Tax (SDLT) advice
- Inheritance Tax planning and mitigation advice
To discuss how we can assist you further with Capital Gains Tax, contact us at firstname.lastname@example.org or fill out the form below.
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