Capital gains tax: How to work out if you need to pay the levy – you could be exempt

Josh Buckland on Boris Johnson's future with tax and energy hikes

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

People need to inform Her Majesty’s Revenue and Customs (HMRC) if their taxable gains are more than four times their allowance. They also need to report their gains in their tax return if they have registered for self-assessment.

A self-assessment (or SA100 form) is a system that HMRC uses to find out how much income tax and National Insurance a person needs to pay on any income that isn’t taxed at source.

The tax year runs from April 6 to April 5 the following year.

It is important for individuals to notify HMRC if they sell their property or land.

This applies even if their gain is below the tax-free allowance or they made a loss.

Non-UK residents do not pay tax on other capital gains.

Last year, the Office of Tax Simplification (OTS) published two reports at the behest of Chancellor Rishi Sunak and concluded that the Government should consider reforming CGT policies.

Capital gains tax is the profit made when an asset is sold for more than it cost to acquire.

It’s calculated from the gain made (the increase in value of the sale price compared to the purchase price) for an asset held for more than one year.

Essentially, it’s the gain a person makes that’s taxed – not the amount of money they receive.

People only need to pay it on gains that exceed their annual tax-free allowance.

There is also usually no requirement to pay CGT on assets that are gifted to husbands, wives, civil partners or charities.

People do not need to pay capital gains tax on gains made from Individual
Savings Accounts (ISA), UK Government gilts and Premium Bonds, betting, lottery or pools winnings.

CGT is typically applicable to shares, investment funds, second properties,
inherited properties, the sale of a business, valuables including art, jewellery and antiques, as well as assets that are transferred at below their market value.

Capital gains on these assets are currently taxed at different rates than those of income tax.

The first £12,300 of capital gains each year is exempt from tax.

CGT is charged at 10 percent for basic rate taxpayers.

What is happening where you live? Find out by adding your postcode or visit InYourArea

It is 20 percent for higher and additional rate taxpayers, or 18 percent and 28 percent respectively on residential properties.

In contrast, income tax is charged at a basic rate of 20 percent, rising to 40 percent and 45 percent for higher and additional taxpayers.

People pay CGT on a gain when they sell or dispose of most personal possessions worth £6000 or more (apart from their car), property that’s not their main home or business assets.

These are known as chargeable assets.

Source: Read Full Article