Capital Gains Tax liabilities
Capital Gains Tax (CGT) is defined by the Government as: “Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.” So, you will pay CGT on an item such as a painting, but not on your house, provided that it is your primary residence.
You are liable to pay CGT at certain times of the year. If you personally disposed of an asset that is subject to a CGT charge, at any time during the tax year ending 5 April 2019, any CGT due will need to be paid 31 January 2020. Accordingly, if you know the amount of the taxable gain, and the amount of CGT payable, you still have more than ten months to organise the funds to pay the tax.
Hopefully, when you sold the asset you were advised of the likely tax charge and reserved funds from the sale proceeds to settle the liability; after undertaking the necessary research – or professional advice – to claim any available exemptions or reliefs? If you haven’t taken advice, do so now, as there are things we can do to relieve your tax situation. Although the stable door has been closed – the gain has crystallised during the 2018-19 tax year, claims for any reliefs can still be made as part of your self-assessment return for 2018-19.
It is beyond the scope of this article to list all the reliefs that can be claimed to reduce a CGT bill, but we can help you consider your options. When you call us for advice, we will need to know the following:
• A description of the asset(s) sold,
• The disposal proceeds,
• Any costs associated with the sale,
• The date and costs of the purchase of the disposed assets.
• Any costs you have incurred since acquiring the asset that have improved it in some way: for example, an extension to a property.
You have plenty of time to plan for the payment of your CGT liability for 2018-19 – latest date to pay is 31 January 2020 – and we recommend that you fully consider your planning options before submitting your 2018-19 tax return.
If you don’t submit an annual tax return, you will need to submit details to HMRC using the “real time” capital gains tax service. The following instructions on this option are reproduced below. However, even if you use this option, it is still advisable to take professional advice on the computation of the chargeable gain to ensure you only pay what is due and no more.
You can use the ‘real time’ Capital Gains Tax service if you’re a UK resident. You’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you report and pay. When you use the service, you’ll need to upload PDF or JPG files showing how your capital gains and Capital Gains Tax were calculated. You can use this service as soon as you’ve calculated your gains and the tax you owe. You do not need to wait until the end of the tax year. You must report by 31 December after the tax year when you had the gains.
After you’ve reported your gains, HMRC will send you a letter or email giving you a payment reference number and telling you ways to pay. Do not pay your Capital Gains Tax bill until you’ve received your payment reference number.
If you need advice about your CGT position please contact TLA Business Services today on 01905 21411