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Few key things you should know about Capital Gains Tax

by Benny Gala DNS Accountants

Capital Gains Tax (‘CGT’) is a tax you pay on profit/gain of an asset you sell or dispose of. This means you get taxed on the gain of the asset you dispose of not the entire amount its worth. Disposing of it not only just applies to when you sell the asset, you would also need to pay Capital Gain Tax if you were to;  

  • Transfer it to someone else 

  • Giving away the asset 

  • Exchange (swap) the asset 

Capital Tax Gains on Property 

In most instances when you sell a property you will need to pay Capital Gains Tax, however they could be certain circumstances where you may not have to. If you sell properties that are; 

  • Inherited Property 

  • Business Premises  

  • Buy to Let Properties 

You will have to pay CGT on these if you make a profit when you dispose of them. Although you don’t need to pay CGT on it if it's your home, you also wouldn’t usually need to pay Capital Gains Tax if you gave away the property as a gift to a Husband, Wife or charitable organisation. Any taxable gains need to be paid within 30 days of the property being disposed. Tax reliefs could also be available in certain circumstances for instance if the property is a business asset. 

This is where a Capital Gains Accountant could come in very useful. When disposing of a property, things can be very complicated and with the help and advice of a CGT accountant it can not only make things much easier but also save you money and help you get a tax relief on CGT. A Capital Gains Accountant can help you with things such as;  

  • Making sure your compliant  

  • CGT computations 

  • Calculate liability that may be due 

  • Help claim reliefs 

  • Finding exemptions 

All of these things above will help lead to significant tax savings. Doing the complicated calculations on your own could lead to you paying too much or not paying enough meaning you’d get an unexpected second bill. A Capital Gains Tax accountant would make sure you being compliant and doing it in the time frame given which is within 30 days from the property being disposed.  

 Capital Gains Tax Allowance 

Each year you get an Annual Exempt amount which means it’s a free tax allowance up to a certain amount where you only have to pay Capital Gains Tax if it goes over that amount. The Capital Gains Tax free allowance is £12,300 a year and £6,150 for trusts. So, until the CGT you have to pay goes above this amount you will not have to pay any. You can also reduce your tax bill by claiming reliefs, finding exemptions and deducting losses – this is another reason as to why a Capital Gains Tax Accountant is very useful because they will do everything in their will and use their expertise to keep your bill under your CGT tax free allowance. 

Avoiding Capital Gains Tax 

It's very possible to avoid paying any Capital Gains Tax if it’s a primary residence. If you have owned it for at least two of the five-year periods ending on the date of sale and the principal residence needs to be used. If your married and file jointly you could avoid tax on up to £500,000 of gain but if your single you would be entitled to £250,000. However, if you used the residence for less than two years but sold due to unforeseen circumstances for example Health issues, change of job location you could still avoid tax.  


Summary 


For anybody that’s new to disposing of property & assets you need to be very careful and make sure your being fully compliant. Dealing with Capital Gains Tax for the first time can be difficult especially if it’s an inherited property or asset because then you will also have to worry about paying Inheritance tax and the tax computations can be complicated and mistakes can cause serious problems. I'd recommend looking into a CGT Accountant whether that’s to completely do the process for you or just for the CGT Advice to make your saving as much as possible and not overpaying.  


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About Benny Gala Senior   DNS Accountants

156 connections, 4 recommendations, 656 honor points.
Joined APSense since, June 30th, 2017, From Harrow, United Kingdom.

Created on Aug 12th 2021 08:11. Viewed 214 times.

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