Frequently Asked Questions | Capital Gain Tax | Insights – UK

What is Capital Gains Tax (CGT)?

Capital Gains Tax (CGT) is a tax on the profit made from selling or disposing of an asset that has increased in value. It is the gain that is taxed, not the total amount received. Common assets subject to CGT include property (that is not your main home), shares, and business assets.

Who Needs to Pay Capital Gains Tax in Leeds?

You may need to pay Capital Gains Tax if you:

• Sell or dispose of property that isn’t your main residence
• Sell shares or other investments
• Sell a business or part of it
• Sell valuable personal possessions worth more than £6,000 (excluding your car)
• Receive compensation for damaged or lost assets
• Gift an asset to someone (other than your spouse or civil partner)

How is Capital Gains Tax Calculated?

Capital Gains Tax is calculated by:

1. Determining the sale proceeds or market value.
2. Subtracting the original cost (or market value at the time of acquisition) and any allowable expenses (e.g., improvement costs, selling costs).
3. Applying any available reliefs or allowances (such as the annual CGT allowance).
4. Calculating the tax due at the appropriate rate (10% or 20% for individuals, higher rates for residential property).

What are the Current Capital Gains Tax Rates?

As of the 2023/2024 tax year, the Capital Gains Tax rates are:

• 10% for basic rate taxpayers (20% for higher rate taxpayers) on most gains.
• 18% for basic rate taxpayers (28% for higher rate taxpayers) on gains from residential property. Different rates may apply for trustees or personal representatives of deceased persons.

What is the Annual Exempt Amount for Capital Gains Tax?

The annual exempt amount is the amount of profit you can make before you have to pay Capital Gains Tax. For the 2023/2024 tax year, the annual exempt amount is £6,000 for individuals and £3,000 for trusts.

What Reliefs are Available for Capital Gains Tax?

Various reliefs can reduce your Capital Gains Tax liability, including:

• Private Residence Relief (for your main home)
• Entrepreneurs’ Relief (Business Asset Disposal Relief)
• Investors’ Relief
• Rollover Relief
• Holdover Relief
• Gift Relief

How Do I Report and Pay Capital Gains Tax?

Capital Gains Tax must be reported to HMRC. This can be done by:

• Completing the Capital Gains section of your Self Assessment tax return if you are already filing one.
• Using the ‘real-time’ Capital Gains Tax service if you do not file a Self Assessment tax return.

When is Capital Gains Tax Due?

Capital Gains Tax on residential property must be reported and paid within 60 days of the sale. For other assets, CGT is usually due by 31st January following the end of the tax year in which the gain was made.

How Can Capital Gains Tax Services Help Me?

Capital Gains Tax services can assist you by:

• Accurately calculating your gains and tax liability
• Advising on available reliefs and allowances
• Helping with the timing of disposals to optimise tax savings
• Completing and submitting your CGT reports to HMRC
• Providing ongoing tax planning advice to minimise future CGT

Why Choose Capital Gains Tax Services in Leeds?

Choosing local CGT services in Leeds offers several advantages:

• Expertise in UK and local tax laws
• Familiarity with the Leeds property market and investment landscape
• Proximity for face-to-face consultations
• Tailored advice considering local economic conditions

How Do I Choose the Right Capital Gains Tax Advisor in Leeds?

When selecting a CGT advisor in Leeds, consider:

• Their qualifications and memberships in professional bodies (e.g., CTA, ICAEW)
• Experience with clients in similar situations
• Client reviews and testimonials
• Their approach to client communication and support
• Transparent fee structures

What are the Common Mistakes to Avoid with Capital Gains Tax?

Common mistakes to avoid include:

• Failing to report all disposals and gains
• Overlooking allowable expenses and reliefs
• Incorrectly calculating the cost basis or sale proceeds
• Missing the reporting and payment deadlines
• Not seeking professional advice for complex transactions

Can I Offset Capital Losses Against Gains?

Yes, capital losses can be offset against capital gains to reduce your CGT liability. Losses must be reported to HMRC and can be carried forward to future tax years if they exceed the gains in the current year.

What Happens if I Don’t Pay Capital Gains Tax?

Failing to pay CGT can result in penalties and interest charges. HMRC may impose fines for late filing, late payment, and inaccuracies in your tax return. Persistent non-compliance could lead to more severe penalties.

How Does Inheritance Affect Capital Gains Tax?

When you inherit an asset, CGT is not due immediately. However, if you sell the inherited asset, you may be liable for CGT on any gain made since the date of inheritance. The base cost for CGT purposes is the market value at the date of inheritance.

What Records Should I Keep for Capital Gains Tax?

You should keep detailed records of:

• Purchase and sale contracts
• Valuation documents
• Receipts for allowable expenses
• Details of any reliefs or allowances claimed
• Any correspondence with HMRC regarding CGT

Where Can I Find Reliable Capital Gains Tax Services in Leeds?

Several reputable firms and independent tax advisors in Leeds offer CGT services. Look for those with strong client reviews, professional accreditations, and transparent pricing. Recommendations from local business directories and personal networks can also be helpful.