How to work out your capital gains tax
|Proceeds of sale less any selling costs||X|
|Cost of asset including purchase plus any enhancement expenditure*|| Y
If the asset was purchased before 31st March 1982 then cost is substituted with the market value on this date plus any enhancement expenditure after this date. For non-residents the market value may be at 5th April 2015 for residential properties and 5th April 2019 for non-residential properties plus any enhancement expenditure after the relevant date, where the asset was held on the relevant date (see below).
Enhancement expenditure does not include any items of maintenance or finance costs. If you carry out work on a property and then sell it immediately, this may be treated as trading income rather than a capital gain.
It is important to understand that the date of disposal for Capital Gains tax purposes is the date contracts are exchanged (or the date that the contract becomes unconditional). It is not the date when you receive the monies (the completion date) unless the exchange of contracts and completion occur on the same day.
Some reliefs are discussed in other articles. After deducting the reliefs there is an annual exemption which is deducted from the net gains after losses in the year. The annual exemption is £6,000 per annum for 2023/24 reducing to £3,000 per annum from 2024/25.
Apart from residential properties, tax on gains is then charged at 10% on any surplus basic rate band available for income tax purposes and 20% on the remainder. For residential properties, gains are charged at 18% on any surplus basic rate band for income tax purposes and 28% on the remainder. If there is an entitlement to Business Asset Disposal Relief the gain is taxed at 10%.
If you are not resident in the United Kingdom then there is normally no Capital Gains Tax apart from on the disposal of dwellings after 5th April 2015, disposals of other land and buildings (including companies that hold more than 75% land or buildings) after 5th April 2019 or assets used in a UK trade. You may have a liability if you dispose of an asset and you were to return to the UK within five years of leaving.
For UK Residents:
Where there is a residential property sale and there is Capital Gains Tax to pay, the gain must be reported and the tax paid to HMRC within 60 days of the completion of the sale.
For non-UK Residents:
Where there is a sale of any property (whether there is tax to pay or not), a report has to be made to HMRC within 60 days of the completion of the sale and where there is Capital Gains Tax to pay, it must also be paid within 60 days of completion of the sale.
© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S S Thandi and M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
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