More changes to Capital Gains Tax! To make sure you don’t fall into any pitfalls with the new changes and to plan ahead we’ve detailed below what you need to be aware of.
How does it work currently?
Currently any capital gains made by individuals are reported through your self-assessment. This means that if you sell an asset and make a profit on it between 6th April 2019 and 5th April 2020 it must be declared on your tax return and tax paid by 31st January 2021.
New rules will be coming into effect from 2020/21 onwards meaning that tax payable on certain types of gain will be due a lot sooner! The silver lining is that these new rules will only apply for gains made on the sale of residential property after 6th April 2020.
You will have just 30 days after completion of the sale to submit a provisional calculation of the gain and pay the estimated tax due. In addition to this you will still need to declare it on your self-assessment tax return by the usual deadline and pay any tax that is still outstanding.
The 30-day declaration and payment applies whether or not you already submit self-assessments. If you’re not currently in the HMRC system they won’t insist you register however you will have to review the provisional calculation after the tax year and make any changes needed.
Estimating your Capital Gains Tax
To calculate your provisional Capital Gains Tax (CGT) bill you’ll need to estimate your taxable income for the year to determine how much CGT is payable at 28% and 18%
- You will be allowed to reduce the gain liable by using up any losses brought forward and any losses made in the current year.
- If you intend to sell assets which will make a loss consider making the transaction before you report a gain within the 30-day period.
Once you’ve submitted the provisional calculation and paid the estimated tax there’s no way of going back to change it until you submit your self-assessment at the end of the tax year. If you don’t report within the 30-day deadline there will be penalties, although these haven’t been confirmed yet.