What Is Capital Gain Tax?-Rates & Allowances 2017/18|DNS Accountants

by Vidit Agarwal Marketing Director

Capital Gain Tax Explained

Capital Gain Tax (CGT) is a tax charged on the gain or profit made from the sale or disposing of an asset. The total amount of money you received is not taxed, it is the gain that you make is taxed. Let’s take an example to draw a clear picture in mind about what exactly is capital gain tax: If you bought a car, worth £80,000 and sold it later for £100,000.The capital gain is difference between the selling price and purchase price (£100,000-£80,000.)This means you made a gain of £20,000.There is no need to pay capital gain tax on some assets such as gains made form betting, lottery, pool swings, UK government gilts and premium bonds and many more,click here to read more about them. You only have to pay capital gain tax, if all the gains within a year are above the annual tax-free allowance limit.

Capital Gain Tax Allowances

If your capital gains or profits made from the sale or disposing of your assets within a year is more than annual exempt amount, you have to pay capital gain tax .The capital gain tax allowance has been increased from previous year i.e. £11,100 for individuals and £5,550 for trust. Annual Exempt Amount for the year 2017/18 is:

Tax-free allowance for individual, personal representatives and trustees for disabled person is £11,300.
Tax-free allowance for other trustees is £5,650.

Capital Gain Tax Rates 2017/18

There are two different rates of capital gain tax. In other words, you pay different tax rates on gains from property and other assets. To work out your capital gain tax, you should also know what your tax band is.

If you fall under the higher-rate tax payers or additional tax payers you need to pay:

28% Capital Gain Tax (CGT) on gains made from the sale of property.
20% Capital Gain Tax (CGT) on gains made from the sale of other assets/non-property assets.

And if you fall under the basic-rate tax payer you need to pay:

18% Capital Gain Tax (CGT) on gains made from the sale of property.
10% Capital Gain Tax (CGT) on gains made from the sale of other assets/non-property assets

The capital gain tax paid by basic-rate income tax payer also depends on the size of the gain they had made.

How To Pay Capital Gain Tax?

Any Capital Gains Tax, due on the sale of property needs to be reported and paid to HMRC by the end of January in the year, following the tax year in which the gains were made. Once you have calculated your each gain or loss that you need to report, you can pay them either by:

Using the ‘real time’ capital gain tax service, you can use this service if you’re a UK resident. Government gateway user ID and password is required to use this service. You’ll need to show how your capital gains and capital gains tax were calculated by uploading PDF or JPG files.

· You can also report capital gain tax while filling for the self-assessment return. Tax return must be send by the 31^st January, if doing online or by the 31^stOctober, if you are sending paper forms.

Once you’ve sent your tax return, HMRC will contact you and will tell you how much tax you owe and would also inform you about further details.

Do You Need To Pay Capital Gain Tax?-Work Out Your Capital Gain Tax