Capital Gains Tax – Residential Property

May 20, 2022 12:30 pm Published by

In this blog we will be discussing Capital Gains Tax, and explaining what CGT is in relation to residential property.

What is CGT?

CGT stands for capital gains tax. Capital gains tax is the tax you pay on an asset that you have sold (disposed of) that has increased in value; you pay the tax on the profit you made.

HMRC gives the example: You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).

Disposing of an asset includes giving it away as a gift, swapping it or something else, selling it, getting compensation for it.

You pay CGT on the gains you made on an asset when you sell.

What do you pay Capital Gains Tax on?

You pay CGT on ‘chargeable assets. For example:

– personal possessions worth over £6,000 or more (Not cars)

– Property that isn’t your main home

– Shares (not in ISA or PEP)

– Business assets

When you don’t have to pay Capital Gains Tax

You only pay CGT on total gains above your annual tax-free allowance.

You don’t pay it on:

– Lottery winnings

– ISA or PEPs

– UK government gilts or premium bonds

What are CGT rates charged at?

The rate depends on which type of chargeable asset you have disposed of, and what tax band the gain falls in when added to your taxable income.

CGT is either charged at the basic rate of either 10% or 18% for basic rate taxpayers.

For higher or additional rate taxpayers, the GCT rate is either 20% or 28%.

If you’re normally a basic rate taxpayer, but if the gain added to your taxable income pushes you into the higher/additional bracket, you will pay a bit of both CGT rates.

Gains on most chargeable assets are subject to the basic 10% to 20% rate, depending on depending on whether the taxpayer is higher/additional rate payer.

These higher percentages, 18% and 28%, are for if the asset disposed of is a residential property.

There is a special rate of 10% on some business assets.

What is real time CGT

HMRC has set up a ‘real time’ CGT service. This is to help those who need to report the disposal of assets which are subject to CGT.

This avoids the need for a Self-Assessment form if they were otherwise not needing to submit a tax return.

The ‘real time’ element comes into play as before, self-assessments were used to report Capital Gains Tax on residential property annually. Whereas now, with Real Time Capital Gains Tax reporting, people no longer need to complete a self-assessment for solely CGT on residential property.

Reporting and pay Capital Gains Tax

CGT can be reported through the Government’s website, using your gateway login.

Residential Property

The time that UK residents have when making CGT returns and associated payments when disposing of UK land and property, is extending from 30 days to 60.

Any tax due should be paid within these 60 days.

This applies to those who have sold a property on or after the 6th of April 2020.

To Conclude

In conclusion, reporting CGT has extended from 30 days to 60 days.

The governments Real Time Submission service prevents the need for a self-assessment to be filed for those that would not need to submit one for any other reason.

If you have any questions regarding real time CGT, please contact Spectrum on 01179 902218, or email us.

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This post was written by Daisy Vowles

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