Understanding Capital Gains Tax (CGT) (UK)
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- เผยแพร่เมื่อ 4 พ.ย. 2024
- This video is all about Capital Gains Tax (CGT) - what you pay it on, how much you pay, what rates you pay and how you can offset it (or some of it at least).
CORRECT FOR THE 2022/23 TAX YEAR.
#capitalgainstax #capitalgainstaxuk #capitalgains
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Such a great breakdown, thank you.
@@pppp67567 thanks!
Excellent video, so many TH-cam videos have annoying music and pics, but this was very useful
Thank you!
This is some valuable information right here. Thank you for this
Thanks for watching!
Great content. Could you please do a similar detailed video on IHT? Thank you.
This is a very informative video, yet I am still confused about CGT. These may seem silly questions, but any useful answers appreciated. I purchased a property in 1993 & lived there for 10 years. It cost me about £30k I have since rented it out for 20 0years or so, and paid tax on thr rental income. If I sell it - value about £130k do I pay capital gains tax. The annual allowance: is that a one -off allowance in the year of sale, or does compound from each year since purchase.
I'd recommend you speak with an accountant for clarification as this is a complex area. But the allowance doesn't get compounded. You're only entitled to the allowance in the year of the sale.
@@Louise.Fitzgerald_IFA Thank you so much for taking the time to reply.
@@user-vp9sc2lp6p the annual allowance is one off but you might be able to claim a Private residence relief(PRR).,assuming that the property was your main residence.
Great video. Thank you for taking the time to make it.
Thanks for watching!
Hi there...what about CGT rebasing in 2019... how does this work? Also, as a non resident, I've been disentitled use of a personal allowance against income Does this bar extend to capital gains? Finally, is the CGT 6k allowance usable by non residents? I own a buy to let flat in the UK.
CGT rebasing refers to a method where the acquisition cost of an asset is adjusted based on its market value at a specific date, usually for assets acquired before a certain threshold date. In the UK, for assets acquired before April 2019, you can choose to rebase your capital gains to the market value as of that date. This can help reduce your taxable gain, especially if the asset has appreciated significantly.
As a non-resident, you're generally not entitled to the UK personal allowance for income tax purposes. Regarding the annual exempt amount (this is now £3,000 for the 2024/25 tax year), non-residents can still utilise this allowance against capital gains realised from the sale of UK residential property. This means that if your capital gains are below this threshold, you won’t owe any CGT.
Please note this is information only, not advice. Always consider consulting a tax professional for tailored advice, especially given the complexities of tax law and your specific circumstances.
@@Louise.Fitzgerald_IFA many thanks....v clear
Top class channel subbed 🔥
Thanks!
Very informative thank you so much for posting. If I declared a rented property as now my main residence, moved in and lived there for a few years - then sold it. Would I have to prove to the accountant/HMRC with council tax and household bills to be able to claim for the PPR relief for those "lived in" years?
If you switch homes then you can notify HMRC which property is your primary residence through an election. Where a taxpayer lives in more than one property, they must inform HMRC as to which property is their main home. The homeowner must make a 'nomination' within two years of changing the property that they live in. Taxpayers that are married or in a civil partnership and own two or more homes between them must make a joint nomination and are only entitled to Private Residence Relief on one home between them.
Firstly awesome video I watched a few videos and your one seems the most right to the point no talking around like your trying to sell something or some story telling.
I got a question, I'm a UK resident. I bought a property last year and sold it this year, is the profit I made added to my yearly income? if so will it be on my last year salary or this years salary. I bought the property in March 2022 and sold it January 2023. thank you again for the strong content!
Thanks so much. Was it the only property you owned and did you live in it? If so there's no tax to pay. If it was an additional property to your main home then yes, the profit would be subject to CGT if the gain is over £12,300. The profit doesn't get added to your income as it's not subject to income tax.
@@Louise.Fitzgerald_IFA Thank you for your reply, nope I didn't live at the property
Great content and clear information, i am looking to start CFD forex trading soon however I am unclear if profits are under cgt or income tax considering i already work full time so it wont be my main source of income?
Thanks!
When you engage in CFD forex trading as a full-time employee, the profits you make from these activities are generally subject to Capital Gains Tax (CGT). This is because CFD trading is considered a capital asset transaction.
Capital Gains Tax (CGT) is applied to the profit made when you sell an asset for more than you paid for it. In the case of CFD trading, the asset is the underlying financial instrument. The UK government provides an annual exempt amount for CGT. This means you can make profits up to a certain amount each year without paying any tax. The exact amount changes annually, so it's essential to check the current figure.
Important things to consider:
Frequency of Trading: If you trade frequently or in a systematic manner, HMRC might consider your trading activities as a business. In this case, your profits would be subject to Income Tax instead of CGT.
Trading Style: Your trading style also plays a role. If you trade based on long-term investment strategies, it's more likely to be considered a capital asset transaction. However, frequent, short-term trading might be seen as a business activity.
Record Keeping: It's crucial to maintain accurate records of your trading activities to provide evidence of your trading style and the nature of your profits.
Please note this is information only, not advice, and given the complexity of tax regulations, it's highly recommended to consult with a tax professional or accountant. They can provide tailored advice based on your specific circumstances, ensuring you comply with UK tax laws and minimise your tax liability.
Louise.awesome and very clear....a question if I may...a friends son...
Bought a plot of land for £12k over 20 years ago...and has recently gained plannin* permission and wants ro sell, probably for c.£300k.
Can he open aLLP nad sell the plot to that to avoid CGT.?
Or, if he builds it out first and secures Capital Allowances, could he then sell to his LLP to either avoid CGT, or then be able to use the Capital Allowances to cover or reduce the CGT on the entire lot.?
Please.
I'd advise speaking to an accountant in relation to your query.
Hi Louise, I have a scenario where I declared and paid my capital gains from selling a property in Sept 2022. I hadnt made any rental income since Oct 2021 as the flat was empty until it was sold in July 22. I'm not sure whether I need to complete a SA for tax year 22-23 because the property has been sold, the CGT has been paid and no rental income was accrued from the property in that tax year. Can you help please?
Hi. I'd suggest speaking with an accountant about this as it's quite a complex area.
How come the asset price is not brought into today's value by calculating the inflation ? If I bought a painting for £5k twenty years ago, that money is equivalent to today's £8,700 based on official government inflation figures. If I sell the paiting for £9k now, my gain would be merely £300 and not £4000.
But what you are saying is for the capital gains tax, my gain would be deemed to be £4000. Is this fair ?
Sadly inflation does not get taken into account. It may not be fair but sadly that is how the system works.
Thank you@@Louise.Fitzgerald_IFA
Because they want to get as much money as possible.
what you are referring to is called indexation but it is only available for companies.
Hi, great video!!!
Are my Gains Subject to Income Taxes post Capital Gains. I trade cfds
No, just capital gains tax
Hello sorry if this is long.
2023/2024 (6K CAPITAL GAINS LIMIT)
Lets say I made 10K Profits on stocks.
6K is Tax Free I have to pay 10% on 4K because im low income.
NOW..
In that year I made 2k losses on stocks.. can I offset
So do I pay 10% 2k now???
Absolutely! You can offset your capital gains with capital losses to reduce your tax burden. Here's how it works in your scenario:
You made 10K profits on stocks.
You have a 6K capital gains tax-free allowance.
So, your taxable capital gain is 10K - 6K = 4K.
Now, you also have 2K in capital losses.
You can use these losses to offset your taxable gains.
There are a couple of points to consider:
* Order of deduction: Current year's capital losses are typically used first before offsetting with losses carried forward from previous years.
* Unused losses: Any remaining losses after offsetting your gains can be carried forward to future tax years and used against future capital gains.
It would be worth speaking to an accountant for further clarification.
Thanks for your great video!
Do I need to report my tax return if my gains are below my allowances ? I keep track of my gains very carefully and I know it is below CGT allowance but I don’t know if I have to file a tax return even though I do not have to pay CGT tax
No, you generally don't have to do a tax return if your capital gains are below the allowance. However, there are some exceptions:
* Selling property (except your main residence): You might need to report the sale even if your gain is below the allowance.
* Losses: If you want to claim capital losses to offset future capital gains, you'll need to submit a tax return.
* Registered for Self Assessment: If you're already registered for Self Assessment for other reasons (e.g., running a business), you might need to report your capital gains even if they're below the allowance.
Here are some resources for more information:
*GOV.UK - Capital gains tax: [www.gov.uk/capital-gains-tax/rates](www.gov.uk/capital-gains-tax/rates)
* GOV.UK - Do you need to send a Self Assessment tax return?: [www.gov.uk/self-assessment-tax-returns](www.gov.uk/self-assessment-tax-returns)
It's always best to consult with an accountant if you're unsure whether you need to file a tax return.
We purchased a property in 2001 and lived in it until 2020. We then went travelling and rented this property out. It is our only property as we have not purchased another. As it is our sole property, would we need to pay capital gains tax should we sell? It was never purchased as an investment property but didn't want to leave it empty and was not a good time to sell when we left it. Unfortunately for us, the property hasn't gained much equity in the past 4 years due to property market in our area.
Based on what you've described, you likely won't have to pay Capital Gains Tax (CGT) when you sell your property. Since this is your only property and you previously lived in it as your main residence, you'll most likely qualify for full Private Residence Relief (PRR) which exempts any capital gain from CGT.
Here's how PRR applies in your situation:
* Full Ownership: You mentioned you jointly purchased the property, so assuming joint ownership is still the case, both you and your partner would benefit from PRR.
* Main Residence: You lived in the property as your main residence until 2020.
* Letting Period: Even though you rented it out for the past 4 years, PRR can still apply to the entire ownership period for a sole or main residence.
You also mentioned the property hasn't gained much equity. If there's no significant gain on the sale (selling price minus purchase price), there won't be any capital gain to tax even without PRR.
While the situation suggests you likely won't owe CGT, consulting with a qualified accountant is always recommended. They can provide a more definitive assessment based on your specific circumstances and any additional details that might be relevant. This could include factors like improvement costs or specific dates of ownership changes.
I hope that helps!
@@Louise.Fitzgerald_IFA thank you very much for your advice.
You're very welcome
If you acquire an asset as a non-UK resident and then later become a UK resident - is the acquisition cost (for CGT purposes) the cost at the time of acquisition or the value at the time of becoming tax-resident in the UK?
This is a tricky situation, and the acquisition cost for CGT purposes depends on your specific circumstances and the type of asset. Here's a breakdown of the two possibilities:
Scenario 1: Acquisition Cost at Purchase
This is generally the more likely scenario. For most assets acquired as a non-resident and then disposed of while a UK resident, the acquisition cost for CGT purposes is the original purchase price you paid when you weren't a UK resident. This applies to assets like:
Shares in companies listed on a recognised stock exchange.
Most other investment assets.
In some cases, residential property (depending on purchase date and disposal date).
Scenario 2: Market Value When Becoming Resident (Less Likely)
In some specific situations, the acquisition cost might be considered the market value on the date you became a UK resident. This is less common but can apply to some assets like:
Unlisted shares (shares in private companies).
Business assets.
In some limited cases, residential property (especially for disposals after April 2015).
It's important to note that the rules can be complex, and the best course of action is to consult with a qualified tax adviser or accountant. They can assess your specific situation, the type of asset, and the relevant tax rules to determine the most accurate acquisition cost for CGT purposes.
I hope that helps!
Could you talk more about a sole property that is let, and how many months youd have to live in it to avoid cgt?
Hasn't the cgt limit been halved to 6k? And next year to 3k?
Yes its £6k for 2023-24. And £3k for 2024-25. It is very unfortunate!
Here's a breakdown of CGT implications for your sole property that you rented out:
Private Residence Relief (PRR): This relief is crucial when it comes to CGT on your sole property. Here's how it applies:
* Full Relief: If your property was your only or main residence at some point during your ownership, you might qualify for full PRR, exempting any capital gain from CGT.
* Partial Relief: Even if you rented it out for a while, PRR can still apply proportionally to the period you lived there. This reduces your overall taxable gain.
There's no minimum occupancy period mandated for claiming PRR on a sole property. However, the amount of relief you receive depends on the proportion of time you lived in the property compared to the total ownership period.
CGT Annual Exempt Amount: There is indeed an annual exempt amount for CGT that is due to be halved to £3,000 from April 2024 but this is yet to be confirmed.
While the information above provides a general understanding, consulting a qualified accountant or tax adviser is recommended. They can assess your specific situation, including details like ownership timeline and rental periods, to determine the most accurate amount of PRR applicable and any potential CGT you might owe.
I hope that helps!
Thank you for your video. I want to know if I had borrowed a sum of money from bank by remortgaging my overseas property where it has been my main residence. Will it be regarded as income and had to pay capital gain tax.
I would advise that you speak to an accountant about this.
If me and my sister jointly inherit a property and we've lived in that property are whole lives had no other residents .im assuming we wouldn't have to pay capital gains tax if we sold it ?i assume that would also be the case if we were gifted say a percentage of it as we've never lived in another property ?
If it's your main residence, and always has been there would be no CGT to pay.
Hi Louise, selling my main dwelling, I heard you had to live in it for 2 years before you're free from CGT? or is it just that you have to live in it. Thank you
If it's your only property and you've lived in it the entire time you've owned it then there shouldn't be any CGT to pay when you sell it
Hi, I'm still slightly uncertain -- if I gift my son a small house (it has been rented out for a few years and I've owned it for 15 years, under £350,000), via PEP, and he sells it a year or two later, after living in it himself as the primary residence, will he be able to use his £325,000 plus £175,000 relief for resident properties to offset the CGT? If I survive the next 7 years, he won't need to pay inheritance tax either? Will that mean neither me the mother nor my son need to pay any tax? Thanks!
The £325k + £175k is for inheritance tax not CGT. If it was your son's primary residence when he sells it it shouldn't be liable for CGT. I would advise speaking to an accountant for clarification.
@@Louise.Fitzgerald_IFA Hi, thank you for the speedy reply. So am I right to say I don't have to pay cgt when I gift the house to my son? Can I simply write a letter to him to declare that I have gifted the house? Does it have to be written by a lawyer?
@@sssfff I would suggest speaking with both an accountant and a solicitor to ensure everything is water tight.
If I rented my house out for 3 years then sold it, am I paying on the profit made on the house? How is that calculated?
Yes, you might have to pay Capital Gains Tax (CGT) on the profit you make when you sell your house if you rented it out for 3 years. CGT applies to the profit you make when you sell an asset, such as a house, that has increased in value. The profit is generally calculated as the difference between the selling price and the purchase price of the house. Since you rented out the property, you might qualify for some reliefs that can reduce your taxable gain:
* Letting Relief: This relief reduces the gain you make by an amount proportional to the time you rented out the property.
* Private Residence Relief: This relief applies to the portion of the gain relating to the time you lived in the house yourself.
You also have an annual exempt amount, which is the amount of capital gain you can make in a tax year without paying CGT. For the 2023/24 tax year, this amount is £6,000.
If the total profit after reliefs is above the annual exempt amount, you'll need to pay CGT on the remaining amount. The rate of CGT depends on your income tax band:
* Basic rate taxpayers (income up to £50,270) pay 18%.
* Higher rate taxpayers (income over £50,271) pay 28%.
It's highly recommended to consult with a qualified accountant for personalised advice on your Capital Gains Tax situation. They can help you determine the reliefs you qualify for and calculate the exact amount of tax you might owe.
I hope that helps!
Is capital gains tax allowance separate from income tax allowance or is that 12300 for both of them combined?
They are separate allowances
Thanks for the reply! So say you have a full time job and fancy investing/ trading as long as your capital gains isn’t above the free allowance you essentially can trade up-to that allowance and not have to pay any tax each year?
Exactly right.
@@Louise.Fitzgerald_IFA thanks again for the info 😊
@@Louise.Fitzgerald_IFA I take it the same apples to crypto investments/ trading do you have any videos on that?
Does HMRC automatically deduct tax when you sell a share or do you have to declare it ? For example, I hold shares is US companies so I need to establish this if I were to sell the shares. Thank you in advance
You would need to declare it. CGT doesn't get deducted automatically.
@@Louise.Fitzgerald_IFA Thank you for your response
If I'm selling trading cards ive accumulated over the past few years and start selling alot off for funds to buy more for my collection do I have to pay tax on the profits or will that come under CGT as the profits are way under 12k for the tax year.
If the profit is under the CGT allowance then you won't need to pay CGT.
Hi sold a few cars and machinery in my business but they are all lower value of gains and total 11k gain do I need to report it on the tax return?
As the 11k is under your capital gains allowance, you won't have to worry about reporting it. Thanks for watching!
Would be grateful if someone could direct me to a free downloadable CGT calculator. I've generated one in Excel based on the HMRC example, but an error check by comparing it to another tool would be helpful.
Background - the 24/25 CGT allowance is only £3k, so transferring £20k of shares into an ISA puts you at risk of paying CGT if they have gained more than approx. 15%. I'm OK this year, but I can see that in 3 or 4 year's time I will have to reduce the amount moved into the ISA to less than £20k.
Note - a transfer to an ISA is regarded as a sale followed by an immediate purchase by the ISA, and the same day/30 day rules do NOT apply in this scenario.
Some providers may have one, perhaps Quilter or Prudential?
Also, do you need to inform the government if you gift your second house to your son?
This can been seen as inapropiate disposal of assets (Tax avoidance) by HMRC and land you in a lot of trouble financially.
This is a very complex area and I would suggest seeking legal advice.
Hi I hope someone can help me answer this question? If I give an asset away as opposed to selling or swapping it, I gain no financial benefit. So why am I liable for anY CGT at all?
You're right, there's no immediate financial gain when you simply give an asset away. However, in the eyes of Capital Gains Tax (CGT), gifting an asset is considered a disposal event. Here's why:
* Potential Future Gain: Even though you receive no money now, the recipient could potentially sell the asset in the future for a profit. HMRC wants to capture potential future gains associated with the asset you've owned.
* Valuation Point: Gifting sets a new market value for the asset. This becomes the recipient's base cost for future CGT calculations if they ever sell.
Here's how CGT applies to gifts:
* The disposal value for CGT is considered the market value of the asset at the time of gifting.
* You'll be liable for CGT on the difference between the asset's market value and your original acquisition cost (plus any allowable expenses).
Exceptions to CGT on Gifts:
There are some situations where you won't be liable for CGT on gifts:
* Gifts to Spouse or Civil Partner: Transfers between spouses or civil partners are generally exempt from CGT.
* Gifts to Charity: Donating assets to registered charities typically incurs no CGT.
Remember:
* You can utilise your annual CGT exemption allowance to offset some capital gains.
* It's always best to consult with a qualified accountant for personalised advice on your specific situation.
The lack of comments tells me why our society is so broken right now. No one is educated in the correct way
Sadly there is a distinct lack of financial education in UK schools which needs to be addressed
@@Louise.Fitzgerald_IFA thank you very much for your reply. Do you have any blogs or a Twitter I may follow? Kind regards, Ghost 👻
@@G-host0069 Sure. I'm on Instagram as your_ifa, Facebook as Louise Fitzgerald - IFA and Twitter as yourIFA.
@@Louise.Fitzgerald_IFA can you tell me how much you charge per meeting. I prefee face to face. I want advise on pension planning.
@@precociousdeathdealer202 the initial meeting is completely free of charge. If you'd like to book one, go to my Instagram profile and click on the link.
Tax has always been theft. That is why I make sure HMRC doesn't know which assets I hold. Precious metals Commodities and rare stones, is the way forward if you do it carefully. Pass it to your children carefully in the will. About where it's kept secured.
It's advisable to be upfront and honest with HMRC.
Don’t use healthcare police or education then 😂
@@EthanZoidboth gone to shit anyway
I THINK THIS ADVICE IS NOW OUTDATED I THINK THE ALLOWANCE IS NOW 6K
At the time of recording the information was correct, but it has indeed changed
I think your advice is out of date it's now 3k
Or just don’t pay tax lol
I wouldn't suggest that...
So can I ask my grandad died and left me a piece of land worth 60k I inherited it through his will , I earn minimum wage and live at home with my mum , if I sell his land would I pay anything on that ?
You said you don’t pay CGT when you inherit an asset ? The small piece of land would be an asset right ? Do you pay inheritance tax on that then ? I’m not sure ? I’ve heard of these terms but not really sure what they mean
You don't pay inheritance tax when you inherit an asset but if you later sell that asset you could have to pay CGT. I'd recommend speaking to an accountant for clarification.