Do you have to pay capital gains tax? Only if total earnings exceed your annual CGT allowance | Personal finance | Finance


People must notify Her Majesty’s Revenue and Customs (HMRC) if their taxable earnings are more than four times their allowance. They must also report their earnings on their tax return if they have registered for self-assessment.

A self-assessment (or Form SA100) is a system used by HMRC to determine the amount of income tax and national insurance a person has to pay on any income that is not taxed at source.

The tax year runs from April 6 to April 5 of the following year.

It is important that individuals notify HMRC if they are selling their property or land.

This applies even if their gain is less than the allowance or if they have suffered a loss.

Non-UK residents do not pay tax on other capital gains.

Last year, the Office of Tax Simplification (OTS) released two reports at the request of Chancellor Rishi Sunak and concluded that the government should consider reforming CGT policies.

Capital gains tax is the profit made when an asset is sold for more than its acquisition cost.

It is calculated from the realized gain (the increase in value of the sale price compared to the purchase price) for a property held for more than one year.

DO NOT MISS :

Essentially, it is the gain a person makes that is taxed, not the amount of money they receive.

People only have to pay it on earnings that exceed their annual non-taxable allowance.

There is also usually no requirement to pay CGT on assets that are given to husbands, wives, civil partners or charities.

People don’t need to pay capital gains tax on gains made by individuals
Savings accounts (ISA), UK government gilts and premium bonds, betting, lottery or pool winnings.

The CGT is generally applicable to shares, investment funds, second homes,
inherited properties, the sale of a business, valuables including works of art, jewelry and antiques, and transferred assets at less than market value.

Capital gains on these assets are currently taxed at different rates than income tax.

The first £12,300 of capital gains each year is tax free.

The CGT is invoiced at 10% for taxpayers at the basic rate.

It is 20% for higher and additional rate taxpayers, or 18% and 28% respectively for residential properties.

In contrast, income tax is charged at a base rate of 20%, rising to 40% and 45% for senior and additional taxpayers.

People pay CGT on a gain when they sell or dispose of most personal property worth £6,000 or more (except their car), property which is not their principal residence or their business assets.

These are called taxable assets.

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