Capital Gains Tax Advice


What is Capital Gains Tax?

A UK resident and domiciled individual is taxed on their worldwide income and gains.  A Capital Gain occurs when a chargeable person makes a disposal of a chargeable asset irrespective if they convert it into British pounds.  The disposal date isn’t necessarily when you physically receive the money; it can be when contracts are exchanged like when purchasing residential property.

Certain assets which have a useful life not exceeding 50 years are exempt from Capital Gains Tax unless they have been used in a trade like racehorses, computers, plant and machinery, which includes items such as clocks and watches.

Dates are therefore critical when making a disposal and it is often imperative you should consult an accountant or tax adviser to assist you with this transaction before it is planned to take place.  If you get time your transaction timing wrong, it could lead to a higher Capital Gains Tax Rate and also bring your payment date up to 12 months earlier, whereby you could have used the funds from the Capital Gain to generate additional income or gains.  Also with losses, you may wish to bring these forward or delay a Capital loss to maximise their usage rather than potentially letting them go to waste.


 


How much is Capital Gains Tax?

The rate of Capital Gains Tax varies dependent on a number of factors and interacts with your Income.  The level of your worldwide income will dictate which tax band you will fall within.   Everyone is entitled to an Annual Exemption, after which there is a 10%, 18% (10% + 8%), 20%, 28% (20% + 8%) tax rate in addition to reliefs and exemptions.  If you have a spouse earning less than yourself, it may be worthwhile transferring an asset or share of such to one another to help mitigate Capital Gains Tax.  You must be careful as this can still trigger other taxes or higher Capital Gains Tax if not carried out in a tax efficient manner.  We would therefore highly recommend you speak with us to obtain the appropriate advice.

Please note Companies pay tax on their gains at the Corporation Tax Rates and indexation that was allowed has been abolished since 1st January 2018.  If your assets have been accruing the indexation allowance they will keep this but it will be linked to the Retail Price Index up to December 2017, irrespective of your future date of disposal.

There are also many different and special tax laws relating to Capital Gains, such as those for Chattels, Connected Person Transactions, Share Trading (incl. Cryptocurrencies) and time limits in order to make a claim with HM Revenue & Customs.




There are many different reliefs available to either individuals or companies, some of these include:

  • Entrepreneurs Relief,
  • Inter spouse or civil partnership no gain no loss transfers,
  • Rollover Relief,
  • Gift Relief,
  • Incorporation Relief,
  • Disincorporation Relief,
  • EIS, SEIS and Social Enterprise Reinvestment Relief,
  • Principal Private Residence Relief,
  • Lettings Relief,
  • S.131 whereby a capital loss may be set against income tax,

For those who end up becoming a Non-Resident Landlord, it is vitally important to report the sale of the residential property to HMRC within 30 days of making the sale taking place.  It seems not many solicitors are not telling their clients about this tax law, which are leading to fines being imposed.

Capital Gains Tax is a vast tax with different laws, so feel free to contact us for further Capital Gains tax advice. We would welcome hearing from you to assist you with your tax planning.