We have the expertise you need to ensure you’re fully tax compliant and are making full use of any relief, exemptions, or allowances.
What is Capital Gains Tax?
Capital Gains Tax is applied when you sell possessions that have increased in value. It could relate to something substantial like property, or apply to the sales of less ‘concrete’ assets including investments such as stocks and shares.
The charge applies to the amount you gain, not the entire sum. So, for example, if you sold your second home for £300,000 having bought it originally for £200,000, Capital Gains Tax would potentially apply to any of the £100,000 gains above your annual exempt amount for Capital Gains Tax.
Do I need a specialist accountant and advisor for Capital Gains Tax?
It’s a complex area with various rules, caveats, and exemptions, so utilising a specialist Capital Gains Tax Accountant is worthwhile and can save you money and hassle in the long term. At Butt Miller, our Capital Gains Tax Accountants and Advisors have experience in sifting through every detail to ensure your Capital Gains Tax bills aren’t any bigger than they need to be.
We have several tools in our armoury, including extensive knowledge of the rules and regulations laid down by HMRC. There are numerous ways you can offset Capital Gains Tax, from making use of losses to transferring assets to a spouse or civil partner. We can also help you with completing your Self Assessment Return when that is due. Tapping into the knowledge of a specialist can make a substantial difference to your Capital Gains tax bill, and it’s vital we fully understand the bigger financial picture to limit the tax paid.
What is the Capital Gains annual allowance?
Currently, in the UK, the annual Capital Gains tax-free allowance stands at £12,300. That’s £12,300 that you can gain without having to pay a penny in tax to HMRC. Once that threshold is reached though, the levy will apply. For trusts, the allowance is £6,150.
The rate you pay will depend on how much taxable income you have, which dictates tax band you’re in for CGT, and the type of asset you’ve profited from:
Type of asset Basic rate Higher rate
- Residential property 18% 28%
- Shares 10% 20%
- Cryptocurrency/meme stocks 10% 20%
- Other 10% 20%
What do you pay Capital Gains Tax on?
Capital Gains Tax doesn’t apply to everything, only possessions HMRC class as ‘chargeable assets’. Common chargeable assets include:
- Personal possessions worth £6,000 or more (excluding cars)
- Property, houses, offices, factories, land, etc
- Most shares or investments that are not in an ISA or PEP
- Business Assets
- Other assets, including works of art and antiques
Additionally, Capital Gains Tax will apply to your main residential property if any of the following apply:
- You have not lived in it as your home throughout ownership
- It is not the only property you use as a home
- You’ve rented it out (note that having a lodger doesn’t count)
- You’ve used it or part of it exclusively for business purposes (and thereby claimed tax relief on it)
- The grounds and buildings combined exceed 5,000 square metres
Why do you pay Capital Gains Tax?
There are all sorts of reasons that you might find yourself faced with Capital Gains Tax liabilities. It might be due to inheriting a property or selling a second home, through the sale of your business or its assets, selling shares, selling high-value personal possessions such as antiques, or making gifts of assets to family members.
If any of these apply to you, get in touch today for expert advice on understanding Capital Gains Tax, your yearly tax-free allowance, and your overall Capital Gains Tax liability.
Capital Gains Tax advice for individuals
When navigating big life events such as divorce or inheritance when Capital Gains Tax could apply on disposals of assets, our Capital Gains Tax advisors can help you feel more on top of things. By knowing your tax affairs are fully in order, we can hopefully help take just a little stress out of proceedings too.
Capital Gains advice for businesses
As a business owner, keeping a handle on your finances is imperative. And from giving you tax advice to handling your self-assessment tax return, we can ensure you make full use of valuable tax reliefs, understand the implications of investment business activities, and more.
Get in touch with our tax specialists for a free initial consultation today.
Business asset disposal relief
If you are a business owner planning to sell all or part of your company, you may be eligible for something HMRC call ‘Business Asset Disposal Relief’. This enables you to pay 10% tax on Capital Gains made through selling or closing your business if:
- you’ve owned the business or shares in a trading limited company for 2 years or more; and
- you’re a sole trader, business partner, director or full time employee; and
- You own more than 5% of the business
It’s worth noting that business assets also qualify for relief if disposed of within 3 years of the trade ending, so keep those records!
Capital Gains Tax advice for landlords and property investors
Perhaps you’re a landlord anticipating retirement and the liquidation of your buy-to-let property portfolio? If so, it’s a good idea to consult Capital Gains Tax advisors for landlords and property before you act as you may be able to maximise the relief you’re eligible for.
What is private residence relief?
Private residence relief refers to the tax break on property that ‘has been your only or main residence throughout your ownership’. It means that when you sell your main home, no Capital Gains Tax will be levied. Various criteria must be met – more details can be found on our website.
What is lettings relief?
Lettings relief was available in respect of residential properties sold before 5 April 2020 where you had rented out your main home that qualified for Private Residence Relief.
For sales after 5 April 2020 the relief is limited to properties that the owner has occupied at the same time as the tenant.
Capital Gains Tax on other types of property
We can also advise UK taxpayers regarding tax liability on:
- Inherited properties – while Capital Gains Tax will not be applicable at the time of inheriting it (then it’s Inheritance Tax you need to watch out for), it will be levied upon the sale of the asset. Capital Gains Tax accountants can help reduce the tax on selling an inherited property by advising on the timing of the sale.
- Overseas properties – in some instances tax can be levied by the UK and in the country in which the property is located, a double tax! Again though, if the property has been your main residence, it could be exempt from UK Capital Gains Tax.
Capital Gains Tax for non-UK residents
It’s important to remember that even if you’re not living in the UK, you will still be liable for Capital Gains Tax on UK residential property and from April 2019 non-residential UK property, land, or commercial space when you sell it. The very same rates detailed above apply – 18% or 28% – depending on your tax status. Such gains should be reported through the HMRC online tax return service and paid within 60 days of completing the sale.
An added complexity is introduced in certain circumstances including (but not limited to) when you’ve used the property for business, or the property and grounds are larger than 0.5 hectares, so be sure to tell your tax advisor the full story.
A Capital Gain arising on most other UK assets is currently outside the scope of UK tax for non residents who are outside of the UK for at least 5 years.
What records do I need to keep for Capital Gains Tax?
It’s important to remember that Capital Gains Tax only becomes a consideration once you’ve disposed of capital assets, not upon acquiring them.
When buying property or valuables that will be liable for tax in the long term, it’s therefore important to retain records of what you paid for an item via proof of purchase like receipts or paperwork. For property purchases, HMRC also advises you to log market value and additional costs incurred in relation to the property such as renovation work and Stamp Duty.
How to report Capital Gain losses
If you’ve made a loss, you can report it to offset the amount of tax you’re charged for gains. To do this, you’ll need to write to HMRC with details, or if you file an annual Self-Assessment, include the details in your tax return.
Claims can be made up to 4 years after the asset was disposed of. This is a common area of oversight so be sure to be vigilant in order to pay tax only on the gains you need to.
How can Butt Miller Accountants and advisors help you with Capital Gains Tax?
Our chartered accountants have a wealth of experience and can advise you on all the ins and outs. Expert tax advice is just a few clicks and a phone call away, so why not stop Googling or worrying about tax matters and let our Capital Gains Tax advisors help you move forward with certainty?
We can help you be as tax efficient as possible and will ensure everything relevant is factored in, from private residence relief to other potential tax reliefs and your annual tax-free allowance. Some people pay far too much tax simply because they do not have an in-depth knowledge of which are chargeable assets, or where the challenges lie.
Find out more today
We hope this page serves as a useful guide to the common considerations and scenarios associated with Capital Gains Tax liability. Please understand that every situation is different, however, and that specific Capital Gains Tax advice should be sought based on your circumstances.
Please call or email us at Butt Miller, we’d be delighted to help.
Capital Gains Tax FAQs
Can I avoid Capital Gains taxation?
While Capital Gains Tax is a fact of life in the UK, there are certainly ways to legally limit the amount you pay. Seeking professional Capital Gains tax advice will help you see how best to proceed for tax purposes.
How do HMRC know about Capital Gains?
HMRC deploys various tactics to ensure compliance, from random checks to looking into suspicious activity or targeting specific industry sectors. Attempted tax evasion could cost dear in the long term – via fines or prosecution. Generally, initially, any investigation will be flagged by a letter notifying the individual or business owner that audit work is taking place. If fraud is suspected, they could go back as many as 20 years.
Do I have to pay Capital Gains tax immediately?
For sales of a property, you have just 60 days from completion of a UK sale to pay CGT. A penalty or interest may be added if the funds are not received within this window.
Where Capital Gain tax is incurred in relation to assets other than property and you don’t submit a tax return each year, you can use HMRC’s Capital Gains Tax service to report your gain. This should be done within the same tax year in which you made the gain and will prompt a letter from HMRC which tells you how to go about paying.