Do you have Capital Gains Tax to pay on your property? It’s no good sitting tight and hoping the tax man won’t find out about any property capital gains because you could face a fine if you don’t let your tax office know by October 5Make Text Bigger
Capital Gains Tax (CGT) is not an opt-in process – if you have made a gain and do not already have a self-assessment tax return, the obligation is on you to report the matter to your tax office and not hope you have got away with it just because you have not had a bill.
For property tax purposes, disposing of land, residential or commercial investment properties and furnished holiday lets come under CGT rules.
Some investors come unstuck as to whether tax is due on ‘disposing’ of property, and the general meaning covers:
- Giving away as a gift
- Transferring ownership to someone else
- Exchanging for something else
- Receiving compensation like an insurance payout when property is destroyed.
It’s the gain you make – not the amount of money you receive for the property – that’s taxed under CGT rules.
Before you do anything else, you need to work out if you have CGT to pay.
If you do, the way you tell HM Revenue and Customs differs depending on whether or not you already complete a self-assessment tax return:
- If you’re already completing a self-assessment, you should automatically receive a tax return – or a letter telling you to file online
- If you don’t automatically receive a tax return or a letter and have tax to pay, you must write and tell your tax office before October 5 after the end of the tax year in which the gain was made.
You may have to pay a penalty if you don’t tell HMRC in time, plus interest on any tax due.
You must give HMRC as much information as possible about any gains or losses made and the tax due.
Other key points to remember about CGT are:
- Anyone inheriting a property from a deceased person does not pay CGT – although some tax may be due if and when all or part of the property is disposed of to someone else
- Property developers do not pay CGT but income tax on their profits
- Companies do not pay CGT but corporation tax on chargeable gains
- Furnished holiday lets may qualify for special enhanced CGT treatment, like entrepreneur’s relief.
The best time to look at tax planning for Capital Gains Tax is before committing to sell a property.
Leaving tax planning decisions until after the sale means the transaction is ‘locked’ and you could end up paying more CGT than is necessary.
If you would like further advice on tax or accountancy please call The Money Centre’s Customer Care Team on 01603 894525 and we will be delighted to refer you to our Joint Venture Tax Partners who specialise in property taxation. The initial introduction is a no cost no obligation service.
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