There are two primary forms of capital gains tax: CGT and Capital Allowances. CGT comes into play when you sell an asset at a profit, and it can also apply if an asset is purchased at a loss. In the latter scenario, the loss is subtracted from the gain when the asset is later sold. Capital Allowances, on the other hand, are deductions utilized to decrease your taxable income, thus lowering your tax obligations. These allowances specifically pertain to business assets like equipment and machinery.
Capital Gains Tax for Homeowners
When homeowners sell their properties, capital gains tax becomes a significant consideration. Understanding it might pose a challenge, but it revolves around whether the selling price exceeded the initial purchase price, minus expenses incurred during the purchase, like mortgage interest rates and closing fees. The annual exemption allowance also factors in, reducing the tax burden under this structure.
At Capital Accounting Works, we specialize in guiding homeowners through the intricacies of capital gains tax. We assist in deciphering your tax liability and ensure timely payments, averting expensive penalties.
Remember, Capital Gains Tax must be filed and paid within 30 days of the sale or transfer to avoid HMRC interest charges on outstanding taxes. Meeting this deadline can be challenging, particularly if you're not well-versed in the tax system. Our proficient accountants step in to assist. We ensure timely tax filing, safeguarding you from potential expensive penalties.
Self-Assessment Correction
To stay on course, it's crucial to file your taxes precisely. Any problems with tax payments or credits might lead to adjustments in owed Capital Gains Tax by year-end. Take extra care to review all details. Our accountants are here to assist you in filing accurate taxes, ensuring the right amount is paid.
The Capital Gains Annual Allowance might catch you off guard, as even if you're self-employed, there's a ceiling on the portion of your profit exempt from taxes. For instance, in 2021/22, it stands at £12,300, gradually rising each year until 2022, when it will see another increase. Our accountants can guide you through understanding your yearly allowance, ensuring you make the most of available tax deductions.
Assets subject to Capital Gains Tax
Capital gains tax is applicable to various assets, notably properties and possessions. Personal belongings valued over £6,000 (excluding cars), like valuable collections, jewelry, or art, may trigger this tax. Residential properties—like second homes, holiday residences, or rental properties—fall under this tax, including overseas properties for UK residents. If your home doubles as a business space, it must not exceed 5,000 square meters. Additionally, shares (excluding those in an ISA/PEP) and all business assets such as materials, inventory, and office equipment are susceptible to capital gains tax.
