Capital Gains Tax Planning

If you are thinking of disposing of an asset, it is valuable to understand the reliefs and exemptions available to you. Our tax team are on-hand to help spot opportunities for maximising the available reliefs to make sure you are paying the right amount of tax. We can also assist with disclosing the capital gain or loss on your tax return.

Whether you are selling a property, shares or exiting a business, TWP’s tax team will guide you through the process and the tax implications of your transaction.

TWP can offer advice on making sure your transactions are happening at the right time to ensure you are able to claim all of the relevant reliefs. One of the most valuable reliefs can be Entrepreneurs’ Relief and a review prior to a disposal of your part of a business can give piece of mind that you know what your tax rate will be. If you are not meeting the conditions to claim Entrepreneurs’ relief it is better to know that prior to the sale taking place as some careful planning may mean that you can qualify for the relief.

If you are selling a property then there are several reliefs which could be available to you based on the circumstances so it is worth getting in touch with one of our team.

Non-UK residents were outside the scope of capital gains tax prior to April 2015, however those with UK residential property must now calculate the capital gains or losses they make on their UK residential properties. From April 2019 this also applies to commercial property. It is important to seek advice when disposing of UK property as non-resident capital gains tax forms are due 30 days after the completion date and late submissions attract penalties.


Reporting and payment of Capital Gains Tax on Residential Property

In April 2020, some more important changes in the rules concerning capital gains tax will come into effect. The changes below will apply to the way both capital gains are calculated and how tax is paid. It will affect the disposal of all residential properties owned by individuals.

From 6 April 2020 individuals, trustees and personal representatives realising a taxable capital gain from the sale or gift of UK residential property will have to make a ‘residential property return’ and a payment on account of Capital Gains Tax within 30 days of the completion date of the disposal. Failure to pay on time will result in HMRC imposing interest and potential penalties.

At present, you would report capital gains on your self-assessment tax return, with any resulting tax being payable by 31 January following the year in which the gain was made.  So, for example, if you sold a second property on 1 May 2018, this would be reportable on a 2018/19 tax return with the tax being payable by 31 January 2020.  In this example, this gives someone a period of 20 months longer to pay the tax than they will have under the new rules.

As mentioned above, under the new rules, 30 days following completion of the sale of a residential property you have to submit a provisional calculation of the gain and pay the tax that is due. Ultimately the gain will be still recorded on your self-assessment form and adjust for any additional tax that is due or recoverable. Interest may be charged if the capital gains tax paid is too low and you will have to wait until the submission of your return before obtaining a recovery if you have accidently overpaid.

It may be difficult to determine whether you pay tax at 18% or 28% as this will be dependent on your income for the year. This may or may not be easily quantifiable if the sale occurs part way through a tax year.

Please also note that this new deadline applies even where no money has changed hands – e.g. when a property is transferred into trust or gifted to a family member.

In addition, to establish whether tax is payable or not on a disposal, the sale of your main residence must also be reviewed in case the gain attracts partial relief rather than full relief.

It is important that you are aware of the introduction of a 30-day reporting and payment window which marks a significant change to the administration of Capital Gains Tax. If you do wish to discuss this matter further, please do contact the Tax Team at TWP.

Other Changes

Lettings relief – Previously if you sold a residential property which was at one time your main residence but had then been rented out, it was possible to deduct ‘letting relief’ up to £40,000 from any capital gain. From 6th April 2020, this relief is no longer available unless the letting of the property occurred while the owner was living in the property. This relief is therefore no longer available to the vast majority of disposals.

Principal Residence Relief – From 6th April 2020 tax relief will only be provided for the final 9 months of ownership. This was reduced from the previous allowance of 18 months.