Capital Gains Tax

The personal capital gains tax allowance (CGT allowance) for the 2020-21 tax year is £12,300.

This is an increase from £12,000 in the 2019-20 tax year.

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. In certain circumstances, married couples can pool their allowances.

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 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 you are selling must be matched to the ones 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 and 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 along with Contract for Differences (CFD).

Contact us for more information

Alexander & Co provides specialist tax and accountancy advice to many landlords and property investors, from advising on the Capital Gains Tax aspects of selling or disposing of assets, to structuring your company in the most tax efficient way. We frequently advise landlords on the benefits and pitfalls of holding buy to let properties in a limited company, as opposed to holding them personally.

As a landlord or investor there is a wide range of issues to consider to minimise your tax burden and increase profitability. Our expert team is on hand to guide you through the complex legislation.

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Many landlords and property investors are not familiar with how to off-set capital gains tax effectively, this often leads to tax bills much larger than they ought to be.

Our expert tax advisors can advice 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. Private Residence Relief is available for the amount of time you lived in it, together with an 9 month grace period up to when you sold it, regardless of whether you lived in the property during this period or not, 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 have a considerable effect on reducing the amount of Capital Gains Tax due when disposing of a property you once lived in.

Lettings Relief

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 or where 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. This sizable relief is the lower of the amount of private residence relief available in respect of the letting, £40,000, or the amount of the gain arising by reason of 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 tax in the UK, you max also have to pay tax in the country where the gain was made, effectively paying tax twice. We can also advise if you are able to claim relief in this situation.

Capital Gains Tax for non-UK residents

If you are non-resident in the UK but return to the UK within 5 years of leaving, you may have to pay UK tax on the disposal of overseas properties.

Capital Gains on inherited properties

You will pay capital gains on an inherited property when you sell it, 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.

There are now two different ways in which you are required to report and pay Capital Gains Tax.

For UK residential property sold since 6 April 2020, this is reported differently from any UK residential property sold before 6 April 2020 as well as any gains from other assets, such as commercial property or shares.

If the gain arose from a residential property sold since April 2020, this needs to be reported to HMRC within 30 days of the sale, with 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 the 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.

If you make a loss on a chargeable asset, you can report this to HMRC to reduce your total capital gain.

When you make a loss, this amount is deducted from the capital gains made in that year. It 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 registered 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 (subject to certain exceptions)

In certain circumstances, special rules apply to how HMRC deals with capital gains. These include Capital Gains on the following:

In each of these situations, Alexander & Co can advise you.

Contact us

At Alexander & Co, all our tax accountants are fully certified, ensuring we provide expert advice to help reduce your tax liability as much as possible and keep you on the right side of HMRC.

We offer a complimentary initial consultation to review your personal circumstances and discuss the best route forward. This can be arranged face to face, or if you prefer via phone or video call.

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

Contact a Capital Gains Tax advisor