Capital Gains Tax Returns can be a tricky concept to get your head around, so it’s a good job we’ve written this blog that explains everything as simply as possible. Read on to find out everything you need to know about Capital Gains Tax…
What is Capital Gains Tax?
Capital Gains Tax is a tax that occurs when you dispose of an asset that has increased in value. You’ll be taxed on the gain that you receive as a result of the sale, rather than the total amount. Disposing of an asset can refer to a number of different things including selling it, giving it away as a gift, swapping it for something else or receiving compensation for it.
What do you pay on it?
Capital Gains Tax will be paid when you sell or dispose of a number of different assets. These include personal possessions that are worth more than £6,000 excluding your car, any property that isn’t your main home or your main home if it has been let out, shares that are in an ISA and any business assets.
You won’t have to pay it on your total gains above a tax-free allowance and you also don’t usually pay it on gifts that you give to your husband, wife, civil partner or to a charity.
When will you not be required to pay?
You’re not required to pay Capital Gains Tax on certain assets including ISAs or PEPs, UK government gilts and Premium Bonds and betting lottery or pool winnings. When an asset is inherited, for example from a deceased relative, Inheritance Tax is normally paid via their estate and you will only be required to pay Capital Gains Tax if you later decide to dispose of the asset.
When will I need to pay?
You will be required to pay Capital Gains Tax if you sell an asset (such as a painting) and your taxable gains are above your annual Capital Gain Tax allowance. The tax-free allowance is currently set at £11,300 for individuals and £5,650 for trusts.
How to report and pay Capital Gains Tax
You can either report your Capital Gains Tax right away using the ‘real-time’ service or annually when you complete a Self-Assessment tax form which includes Capital Gains Tax Returns. Before you make either of the reports you will need to ensure that you have calculations for each capital gain or loss that you report and information from your records about the costs and what you received.
Self-assessment should be used to report your gain in the year after you disposed of the asset. If you aren’t entirely sure how to go about filling out the forms, seek the help of an accountant or a tax advisor.
For more information about how to calculate and file Capital Gains Tax Returns, along with the range of other tax and accountancy services The Accountancy Solutions offers, please visit https://theaccountancysolutions.com/ or call 01216297768 (Birmingham) or 02070784001 (London).