LJS Accounting Services

How To Calculate Capital Gains Tax on Property

How To Calculate Capital Gains Tax on Property

Capital gains taxes are a form of taxation the government takes regarding the gains made on various assets. Your assets, which you own, must be held for longer than 12 months, including sales of shares, businesses, and properties.

Understandably, calculating capital gains tax (CGT) on property can be difficult to understand, but we’re here to break it down for you. To find out more about capital gains tax on property, continue reading.


What is Capital Gains Tax?

So, what is capital gains tax? Capital gains are the tax on profit that’s been made; it can apply to a variety of valuables that you own. You’ll likely owe capital gains tax if you sell your belongings at a certain profit. Capital gains tax is applied to numerous valuables, with cryptocurrency sales even being on the list.

Unlike when you pay income tax, capital gains aren’t automatically deducted by inland revenue; they need to be self-reported. HMRC can open a dispute and give out fines worth more than what your tax deduction could have been if you don’t provide the correct information or fail to notify them about selling valuables.

You also need to inform HMRC when you make a large sum of money from profit. In some cases, couples will share their assets. If you’re wondering whether or not assets can be legally shared between you or your partner, they can.

People who are either in a civil partnership or married can exchange assets between themselves. Rather than the date of transference, you’ll pay your capital gains on a timely basis, depending on how long you’ve owned your assets.

Gains are taxed between 10% and 18% for basic taxpayers and at 20% to 24% for higher or additional-rate taxpayers. There’s no way to avoid capital gains. If you try to, you’ll likely be caught.


Capital Gains Tax on Property

Your overall gain is typically the difference between what you paid for your residential property and the amount of money that you received when you sold it. If your combined capital gains are well over your allowance for the year, it’s important to report and pay capital gains tax.

Working out your capital gain can be difficult, especially if it’s your first time dealing with capital gains tax. In many situations, individuals use the market value of their property to help work out their gain.

We recommend doing this if your property was gifted, inherited, owned by you before April 1982, or was sold for less than it was worth.

However, there are some special rules and regulations that must be followed when calculating your gain if you live abroad, are selling a property from the estate of someone who’s deceased, own a property that was compulsorily purchased, or has sold a lease or part of your land.

If you own property with other individuals, you’ll need to work out the gain for just the share that you own. Regarding deducting costs, you’re able to deduct the costs of buying, selling, and improving your property from your gain.

These typically include overall costs of improvement work, such as extensions, and costs of estate agents and solicitors. It’s important to note that you can’t deduct the costs of maintenance on your property, including decorating fees.

If your property was your home, a business asset, or had a dependent relative residing in it, you might be able to get tax relief. Once you’ve gathered all the relevant information that you need and understand what your gain on your property is, you can go ahead and calculate whether or not you need to report and pay capital gains tax.

You can use the capital gains tax calculator on the government website. However, you won’t be able to use the calculator if you’ve sold land or other chargeable assets in the tax year, sold business premises, or reduced your share of property that you own, to name a few.

If you’re an agent, company, personal representative, or trustee, you also won’t be able to use the calculator. It’s essential to report and pay capital gains tax on the majority of UK property within 60 days.


Paying Capital Gains Tax

You can pay capital gains tax to HMRC by debit or credit card online. To pay capital gains tax, you’ll need to have your 14-character capital gains payment reference number handy.

This can be found in your UK property account (if you sold a property on or after April 6, 2020) or in the letter or email sent to you by HMRC. It’s important to be aware that if you pay capital gains tax through HMRC by corporate credit or debit card, you will have to pay an additional non-refundable fee.

There’s a lot to be aware of when it comes to paying capital gains tax. For many individuals, the help of a professional tax adviser is most beneficial.


Tax Advice at LJS Accounting Services

LJS Accounting Services is here to help clients with their calculations, providing professional guidance to those who might require more information about capital gains tax and how it works.

Getting your calculations wrong could cause some trouble with HMRC, and although it can easily be done, letting our expert team take control could help. Many advantages come with having an appointed tax adviser at LJS Accounting Services.

We can assist you in all aspects of tax, from going through general tax rules to informing you of taxable gains you should be aware of. We aim to make the process simple when you have to pay tax. Our team is highly experienced, with years of knowledge behind them.

We will guide, support, and advise you when it comes to selling assets. We offer a wide range of services, including assisting clients with their self-assessment tax returns. We’re here to help you by ensuring your capital gains tax is calculated accurately.

When the government taxes capital gains, they check the necessary information to make sure that every detail you’ve provided is correct. This is why it’s best to work collaboratively with a firm like LJS Accounting Services; we have adequate experience and knowledge in the field.

Having provided expert tax services to clients up and down the country for well over a decade, you can trust our team to assist you. To talk further about your capital gains tax bill, reach out to us today.

Have You Got Any Questions?

Need to talk to someone? Get in touch with one of our consultants today and we will be happy to help.
Share post:
Want To Work With Us?

Need to talk to someone? Get in touch with one of our expert accountants today and we will be happy to help you with your matter.