Capital Gains Tax (CGT)
Capital Gains Tax is a tax on the profit you make from disposing of your asset. If you make a loss from the disposal, then you set the loss against gains from another sales. Reliefs such as Rollover Relief, Gift Relief or Business Asset Disposal Relief are available to either reduce or defer the capital gains tax if you meet certain conditions. Disposal in this context means:
- selling
- giving away the asset (as a gift)
- transferring the asset to someone else
- swapping the asset for something else
- receiving compensation for the stolen or damaged asset
Some assets, for instance, cars, UK government securities (gilts) and wasting chattels such as racehorses and greyhounds are exempt from capital gains tax. This means you will pay no CGT even though you make profits from the sales. So if you own racehorses and then sell them even with high profit, there is no tax to pay.
CGT payment
For individuals, the CGT for any assets other than UK residential property is included in a self assessment tax return. And so is the payment. However, from 6 April 2020, the CGT due on UK residential property must be reported and paid, using capital gains tax on UK property account, within 30 days of its sale completion date between 6 April 2020 and 26 October 2021 or 60 days for the sale completion date on or after 27 October 2021. Unlike income tax, there are no payments on account for CGT.
A company will, instead, include the gain (called chargeable gain) in its corporation tax computation. An indexation allowance, up to December 2017, is also available to reduce its chargeable gains and CGT to pay. The CGT liability will be part of the corporation tax payable.
CGT rates
Unless the reliefs apply, the CGT rates for individuals are normally 10% or 20% for gains on non-residential assets and 18% or 28% for residential ones
Unlike individuals, a company, however, pays its CGT at the same rate as corporation tax (currently 19%).
Annual Exemption Amount (AEA)
Each individual is entitled to an AEA, which is similar to the Personal Allowance. This means the first £12,300 of your gain will be tax free. However, if you do not use it in any tax year, you will waste/lose it as you cannot carry it forward to the following year.
In contrast, a company does not get an AEA as individuals do because it gets an indexation allowance instead.
Exempt transfers
Transfers or selling either between spouses (including civil partners) or to charities or both are CGT exempt.
Capital gains tax advice
Our accountants are fully qualified as well as experienced. Our friendly and reliable services are also flexible. If you are looking for peace of mind services, then feel free to contact MW Accounting Services and we are more than happy to help.