If you have sold an asset that
has increased in value, then Capital Gains Tax will be due. It is the gains
that you will pay tax on and not the amount of money received. When Capital
Gains Tax is due, it is more than often, when a house has been sold. Although
Capital Gains Tax will be due when you have sold a painting, stocks and shares,
sale of a business etc…
So, for example, if you have
bought a house for £120,000 and sold it for £190,000 then Capital Gains Tax
will be due on £70,000. You do not pay any Capital Gains Tax if you have sold a
house that is your main home and residence. You also do not have to pay Capital
Gains Tax if all your gains in a year are under your tax-free allowance.
Your tax-free allowance also
known as the Annual Exempt Amount for Capital Gains for this current tax year
(2020/2021) is £12,300.
You do not pay Capital Gains
Tax on assets you give or sell to your husband, wife, or civil partner, unless,
If they decide to sell later,
they may have to pay tax on any gain. Their gain will be calculated on the
difference in value between when you first owned the asset and when they sold it.
They should keep a record of what you paid for the asset.
The rules have changed from
If you sell a house, you must
report and pay any tax due within 30 days of selling. Before you had until your
next self-assessment to report and pay. If you have not reported and paid any
gains within 30 days of selling, HMRC can charge penalties and even interest on
any late payments.
You will have to register and you’ll
need a Government Gateway user ID and password to set your account up or sign
in. If you do not have a user ID, you can create one the first time you sign
You will need the following
information at the ready,
- Property address and postcode
- Date you got the property
- Date you exchanged contracts when you were selling or
disposing of the property
- Date you stopped being the property’s owner (completion
- Value of the property when you got it
- Value of the property when you sold or disposed of it
- Costs of buying, selling or making improvements to the
Once you have an account you
can sign in at any time to report Capital Gains Tax on UK property or see any
returns you have already sent.
Once you have sent your return
to HMRC, you will be notified on how much you owe in Capital Gains Tax, how to
pay and when to pay by.
How much do I pay?
Rates on Capital Gains varies.
If you are a higher rate taxpayer you will pay,
- 28% on your gains from residential property
- 20% on your gains from other chargeable assets
If you are a basic rate taxpayer,
the rate depends on the size of the gain and your taxable income.
- Work out your taxable income
- Work out your taxable gains
- Deduct your annual exempt amount from your taxable gains
- Add this to your taxable income
- Work out which tax rate you pay
If the amount falls within the
basic income tax band (£12,501 to £50,000 for 2020/2021) you will pay,
- 18% on your gains from residential property
- 10% on your gains from other chargeable assets
You will pay the higher
taxpayer rate for any amount above the basic tax rate.
Your taxable income (your income minus your personal
allowance and any income tax reliefs) is £15,000
You sell a house for £200,000 which you bought
for £170,000 for a gain of £30,000
Deduct your Annual Exempt Amount which is
£12,300 (for tax year 2020/2021) leaving you with a chargeable gain of £17,700
Your basic rate band remaining after your
taxable income above is £22,500 (£37,500 - £15,000)
As the £17,700 is fully within the basic rate
band, this is taxed at 18% which means you will have to pay £3,186 in Capital Gains
You need to collect records to
work out your gains and fill in your tax return. You must keep them for at
least a year after the Self-Assessment
deadline. You will need to keep records for longer if you sent your
tax return late or HM Revenue and Customs (HMRC) have started a check into your
return. Businesses must keep records for 5 years after the deadline.
The new 30-day rule can make
things stressful but being organised and keeping records will help a lot. If
you are struggling with Capital Gains Tax, give us a call on 02920 653 995 to
see how we can assist you.