Capital Gains Tax Advice

Capital Gains Tax (CGT) is a crucial aspect of the UK’s tax system that affects individuals and businesses when they profit from the sale or disposal of certain assets. Whether you’re selling shares, property, or valuable personal items, understanding how CGT works can help you manage your financial affairs more effectively and avoid unexpected tax bills.

Some individuals end up paying more tax than necessary because they miss opportunities to reduce their liability, while others forget to declare their gains and risk facing penalties. It’s important to understand CGT and seek Capital Gains Tax advice to ensure you only pay what you owe.

What Is Capital Gains Tax?

Capital Gains Tax is a tax on the profit (or ‘gain’) you make when you sell or dispose of an asset that’s increased in value. It’s important to note that it’s the gain you make that’s taxed, not the total amount of money you receive. For instance, if you purchased a painting for £10,000 and later sold it for £25,000, your gain would be £15,000, and it’s this amount that would be subject to CGT.

What Assets Are Subject to Capital Gains Tax?

CGT applies to a wide range of assets, including:

Property: Most commonly, this includes second homes or rental properties. Your main residence is usually exempt under the Private Residence Relief.

Shares and Investments: This includes stocks, bonds, and certain other investment products, excluding tax-free accounts like ISAs (Individual Savings Accounts).

Business Assets: If you sell all or part of your business, the gains may be subject to CGT.

Valuable Personal Possessions: Items such as antiques, jewellery, or art, if they’re worth more than £6,000.

Reporting and Paying Capital Gains Tax

You must report and pay any CGT owed to HM Revenue & Customs (HMRC). For residential property, the tax must be reported and paid within 60 days of the sale. For other assets, the gain should be reported in your annual Self-Assessment tax return. Failing to report and pay CGT on time can result in penalties and interest charges.

How to Lower Your Capital Gains Tax Liability

There are several ways to reduce your CGT liability:

Use Your Annual Exempt Amount: Ensure you take full advantage of your annual allowance.

Offset Losses: If you’ve made losses on other assets in the same tax year, you can offset these against your gains.

Spousal Transfers: Assets can be transferred between spouses or civil partners without incurring CGT, allowing couples to maximise their combined allowances.

Invest in Tax-Free Accounts: ISAs and certain other investment vehicles can shelter your investments from CGT.

Conclusion

Capital Gains Tax is an important consideration for anyone selling valuable assets. By understanding the rules, making use of available allowances, and planning carefully, you can minimise your tax liability and manage your finances more effectively. If you’re unsure about your CGT obligations, it may be wise to consult with one of our personal tax professionals for Capital Gains Tax advice to ensure you’re compliant and optimising your tax position.