Capital gains tax is payable when you sell an asset and make a profit, but it can also be relevant when you gift, transfer or even exchange an asset. The asset can be anything like your property (residential or commercial), shares etc.
Our capital gains tax accountants and advisors can help individuals with a wide range of capital gains tax services. We have listed some of the common services we deal with below:
- Sales of residential buy-to-let properties
- Sales of commercial properties
- Sales of shares of a listed company or family-owned businesses
- Transferring of properties/shares to children or other family members
- Sales of properties with a claiming for main residence relief also called Principle Private Residence Relief
- Sales of properties with a claim for letting relief
- Sales of shares with a claim for Entrepreneur’s relief
How are the capital gains calculated?
In simple words, the capital gains are calculated by deducting the purchase cost of the assets from the disposal proceeds received on the sale. For example, if you buy a property for £200,000 and then sell it for £500,000, you have made a profit of £300,000, assuming no tax relief is available. You will pay capital gains tax on £287,700 (£300,000 - £12,300) – the figure after the deduction of capital gains tax exemption for the tax year (capital gains exemption for 2022/23).
There are special rules for calculating your gain if you live abroad, sell a lease or part of your land, your property is a compulsory purchase, and sell the property from the estate of someone who has died.
What are the tax rates applicable to capital gain?
There are different tax rates applicable on the gains from the sale of residential property than you do on other assets.
- Capital Gains Tax Rates on the sale of residential property
If you are a basic rate taxpayer and all of your gains fall in the basic rate band, then the capital gains tax rate applicable on the sale of the property is 18%.
If you are a higher rate taxpayer and all the gains fall in the higher rate band, then the capital gains tax rate applicable on the sales of the property is 28%.
- Capital Gains Tax Rates on the sale of other assets such as shares, business, etc.
If you are a basic rate taxpayer and all of your gains fall in the basic rate band, then the capital gains tax rate applicable on the sale of the asset is 10%.
If you are a higher rate taxpayer and all the gains fall in the higher rate band, then the capital gains tax rate applicable on the sales of the asset is 20%.
Deadlines and Reporting requirements
You normally complete a self-assessment tax return to report a capital gains tax using the capital gains tax pages. However, suppose you dispose of UK land and property. In that case, you may also need to file a separate capital gains tax return within 60 days of the completion date (30 days for disposals before 27 October 2021).
Various tax reliefs may be available to reduce the capital gains tax significantly. It is, therefore, very important that you identify the correct tax reliefs available to your circumstances. We have summarised some tax reliefs which may be applicable:
- Annual exemption
If the total gains made during the tax year are less than the annual exemption, there is no capital gains tax payable. The capital gains tax exemption for the tax year 2022/23 is £12,300.
The capital losses can reduce the capital gains tax for the year. If you have made any capital loss during the tax year, it can be offset against the capital gain for the year. You can deduct unused losses from previous tax years if your total taxable gain is still above the tax free allowance.
- Gifts between spouses
There is usually no capital gains tax on the assets transferred between spouses or civil partners. The asset would be transferred at no gain no loss basis.
- Main Residence Relief or Principle Residence Relief (PPR)
If you have lived in a property as your only main residence for the whole or part of the period of ownership, you may be eligible for Principle Private Residence Relief (PPR). There are certain conditions which need to be met to make this claim.
- Business asset
Business asset relief is available on the sale of all or part of your business. Business assets relief means you only pay tax at 10% on all gains on qualifying assets. Please click on more information
- EIS Capital Gains Tax Relief
Gain is exempt from capital gains tax when you sell EIS shares, provided that certain conditions are met.
- SEIS Capital Gains Tax Relief
Gain is exempt from capital gains tax when you sell SEIS shares, provided that certain conditions are met.
- Gift Reliefs
Gift relief may be available when you give away business assets or sell them for less than they are worth to help buyer. You don’t pay any capital gains tax when you gift the assets. The person you give them to pays capital gains tax (if any due) when they sell the asset. There are certain conditions attached to claim gift relief. Please click here for more information.
Capital gains tax advice on the sale of property
We provide comprehensive capital gains tax advice on the sale or disposal of the property. Whether you sell residential or commercial property, we can provide you with all the tax implications of selling the property. We can provide pre-sale calculations to give you an idea of how much expected capital gains liability would be and, indeed, all the compliance required after the sale of the property. For more details about our service on this, please click here.
How can Martax Accountants help you?
At Martax, we can help you with capital gains tax position whether you sell a property or other asset. Our complete comprehensive tax advice would ensure that you claim the tax reliefs available to your circumstances on the disposal of assets and pay the minimum taxes.