How is Capital gains tax charged?
Capital Gains Tax (CGT) is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and the gain keeps them within basic rate, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.
What is the CGT rates on residential properties?
A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers (2023-24: 18%) and 24% (2023-24: 28%) for higher rate or additional rate taxpayers. Again, if the gain pushes a taxpayer into the higher rate, CGT will be payable on a proportion of the gain at each rate.
Whatother capital gains tax rates are there?
There are 18% basic rate and 28% higher or additional rate of CGT that apply to gains in respect of carried interest (the share of profits or gains that is paid to an investment fund manager) remain unchanged in the current tax year.
When are CGT payments due?
The usual due date for paying any CGT owed to HMRC is the 31st of January, following the end of the tax year in which the capital gain was made. However, since 27 October 2021, any CGT due on the sale of a residential property needs to be paid within 60 days of the date of disposal. In practice, this change only applies to the sale of any residential property not qualifying for Private Residence Relief (PRR).
There is also an annual CGT exemption for individuals, currently £3,000 (2023-24: £6,000). Husband and wife have a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.
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If you're unsure about the Capital gains tax you may be liable to pay or what percentage you will be required to pay, contact our specialist tax team today. Our tax team can help you stay on top of your CGT payments and ensure that you're aware of the rates you will need to pay. For more information on how we can help you, contact Moore (South) today.