Capital Gains Tax Planning

Smart planning for keeping more of your profit.

When you sell an asset that has increased in value, the government wants a share. This is Capital Gains Tax (CGT). It applies to second homes, investment properties, shares, and business assets. The rates can be as high as 24% for property. However, the rules surrounding CGT are filled with reliefs and exemptions. If you plan carefully, you can reduce this bill significantly. At Tax-Pert, we guide you through the maze of regulations. Because we plan ahead, we help you retain the maximum reward from your investment.

Understanding the Basics

You pay CGT on the gain, not the total sale price. This is the difference between what you paid and what you sold it for. However, you can deduct costs. Buying costs, selling fees, and improvement costs all reduce the gain.

Every individual has an annual tax-free allowance. However, this allowance has been reduced drastically in recent years. Therefore, precise calculation is more important than ever. We ensure every allowable cost is included. We scrub your records to find stamp duty, legal fees, and estate agent fees.

The 60-Day Reporting Rule for Property

If you sell a residential property in the UK, the clock starts ticking immediately. You must report the gain and pay the tax within 60 days of completion. This is a tight deadline.

Many solicitors do not handle this tax filing. Therefore, clients often get caught out. We step in as soon as the sale is agreed. We prepare the calculation in advance. We set up your Capital Gains Tax on your UK Property account. Consequently, we file the return well within the 60-day window. You avoid late filing penalties completely.

Principal Private Residence Relief (PPR)

You do not pay tax on your main home. This is due to Principal Private Residence Relief (PPR). However, what if you lived in the property for a while and then rented it out?

The calculation becomes complex. You get relief for the years you lived there, plus the final 9 months. We perform the time-apportionment calculations accurately. We ensure you claim the maximum relief available for your period of occupation. Thus, you do not pay tax on the private portion of the gain.

Business Asset Disposal Relief (BADR)

If you are selling your business, this is the most valuable relief. Formerly known as Entrepreneurs’ Relief, BADR reduces your tax rate to 10%. This applies to gains up to £1 million.

However, strict conditions apply. You must have owned the business for two years. You must be an officer or employee. We review your eligibility long before you sell. We ensure your share structure meets the requirements. Consequently, you save 10% or more on your life’s work.

Spousal Transfers

Spouses and civil partners can transfer assets between them tax-free. This is a powerful planning tool. If your spouse has not used their annual allowance, we can transfer a share of the asset to them before the sale.

Furthermore, if your spouse pays tax at a lower rate, they might pay less CGT. We analyses your family tax position. We advise on the optimal ownership structure. This simple step can save thousands in tax legally.

Bed and Breakfasting Rules

If you sell shares and buy them back shortly after, “Bed and Breakfasting” rules apply. These rules prevent you from crystallizing a loss or gain artificially. HMRC matches the sale with the repurchase, not the original purchase.

Navigating these share matching rules is difficult. We use specialized software to track your share pools. We ensure your Section 104 holding is calculated correctly. Therefore, your tax return is accurate, even with active trading.

Offsetting Losses

If you made a bad investment in the past, do not forget it. Capital losses can be offset against capital gains. You can carry forward losses indefinitely.

We review your history to find unused losses. We register these losses with HMRC. When you make a big gain, we apply these losses to reduce the bill. This turns a past failure into a current tax saving.

Timing is Everything

Sometimes, waiting a few days makes a huge difference. If you sell on April 5th, the tax is due sooner. If you sell on April 6th, it falls into the next tax year. This gives you an extra year to pay the tax.

Furthermore, tax rates might change in a Budget. We advise you on the timing of your disposal. We look at political trends and tax announcements. Consequently, you sell at the most tax-efficient moment.

Final Thoughts

You worked hard to build your assets. You took the risk. Therefore, you deserve to keep the reward. Capital Gains Tax is voluntary to an extent poor planning leads to high tax.