Guide to Capital Gains Tax

Guide to Capital Gains Tax

Capital Gains Tax can seem complicated! We take you through it step-by-step so you know what to do if you dispose of your assets.

What is Capital Gains Tax?

When you dispose of an asset that has increased in value you’ll need to pay Capital Gains Tax. Disposing of an asset could include selling it, gifting it, swapping it or getting compensation for it. The increase in value (‘gain’) is taxed, not the total value of the item.

What do I need to pay Capital Gains Tax on?

You only need to pay Capital Gains Tax on gains above your annual tax allowance. The Capital Gains tax free allowance is £12,300, or £6,150 for trusts.

You’ll need to pay Capital Gains Tax on ‘chargeable assets’ including:

  • Business assets including your main home if you let it out or use it for business
  • Shares that are not in an ISA or PEP
  • Property that is not your main home
  • Most personal possessions worth £6,000 or more, excluding your car

You still need to pay Capital Gains Tax on an asset you own with someone else. You pay on your share of the gain.

How to pay Capital Gains Tax

The first step is to calculate your total taxable gains for the tax year. Here’s how you do it:

  • Work out the gain for each asset
  • Add together the gains
  • Deduct any allowable losses (if you dispose of an asset that has decreased in value)

Then, you need to report the Capital Gains Tax you need to pay. There are a few different ways to report this:

  • Capital Gains Tax on UK property service within 30 days of selling UK property
  • The ‘real time’ Capital Gains Tax service which reports immediately
  • Your Self Assessment tax return

You’ll need to include your calculations for each asset and information from your records. HMRC will tell you how much tax you owe, as amounts vary depending on your circumstances such as the size of your gain, your taxable income and whether your gain is from residential property or other assets.

Manage your finances with Bokio

With Bokio accounting software, you can do your bookkeeping, invoicing, and manage your finances in one place. With Bokio you can prepare for your Self Assessment tax return, submit automated Making Tax Digital VAT Returns and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.

Accounting is kept simple with Bokio, so you have more time to spend managing your business.