Capital Gains Tax applies when assets that have been sold (or disposed of) have increased in value – you are then taxed on the ‘gain’ (profit), not necessarily the amount of money which you receive (if the gain is 100%, then you might be taxed on the entire amount).
Some assets are tax-free (such as ISAs, PEPs, Premium Bonds, Lottery Wins, Betting Pools), and if your gains fall under your tax-free allowance (£12,300 or £6150 for trusts), then you may not have any tax to pay.
The way in which you report and pay your Capital Gains Tax (CGT) will depend on how you made the gain, as there are different reporting methods for UK residential properties sold since 6 April 2020, and any other gains.
What Do You Need to Report Your Capital Gains Tax?
In order to report your capital gains to HMRC, you need:
- Calculations for each capital gain (or loss) that you’re reporting
- Details of how much you bought the asset for, and how much it was sold for
- The date in which you took ownership of the asset, and the date on which it was disposed of
- Expenses or reliefs that you’re entitled to (so relevant details might include the cost of disposing of the asset, for example)
If you are making use of the ‘real time’ online service provided by GOV.UK, you will also need to have your Government Gateway account information (this is generally a 12-digit [alphanumeric] User ID, a password, and you will need the phone number that you registered with the account for the 2-Factor security code in order to login).
If you are reporting your CGT through a Self-Assessment Return, and you are not registered as self-employed, you will need to complete form SA1, or seek further assistance (this could be from your Accountant, or HMRC).
When do You Need to Report?
There are different timeframes to be aware of, that depend on what your gain has come from.
For disposals of UK Land or Property, if the completion date was on or after 27 October 2021, then you will have 60 days to do this (prior to this, it was 30 days); and if you do not do so within this time, there may be interest and/or penalties to pay.
Even if you’re not a resident in the UK, and you have no tax to pay on the sale of the property, you still have to report the sale of a UK property as a non-resident to HMRC.
For other Capital Gains, you will have the choice of how and when to report – you can do so using the real-time service if you know what you owe, this needs to be reported by 31 December in the tax year after you made the gain (so if you made the gain in the 2021/22 tax year, it would need to be reported by 31 December 2022).
If you are reporting your gains in your Self-Assessment Tax Return, you can report in the tax year after you disposed of the assets – if you do not usually send a tax return to HMRC, you would need to register for Self-Assessment after the tax year in which you disposed of the chargeable assets, and HMRC will inform you of how much you owe in CGT, how to pay it, and when – late payment may result in interest and/or penalties.
If you’re not sure how to determine your Capital Gains, what method you should use to report to HMRC, or require assistance in making sure that you’ve complied by the correct date, our experts are here to help you. We can consult with you to determine what your Capital Gains are, any reliefs or expenses that can be deducted from it, and any liabilities that might affect the amount you declare.
Get in touch with us today, and we can make your tax obligations less taxing.