In April 2023, the threshold for capital gains tax (CGT) is changing. In the UK there is an annual exemption amount for capital gains tax; currently that exemption is £12,300. From April, it lowers to £6000. This could have an impact on anybody selling any property, but particularly when the property is not your primary residence.
Capital Gains Tax legislation is complicated, and Wallace Quinn are not tax advisors – if you think you may be impacted by this change then we would advise you discuss this with a professional advisor.
What is Capital Gains Tax?
CGT is liable if you sell, give away, exchange or dispose of an asset and make a profit/gain.
As a general example,, if you buy a property for £100K and you sell it for £200K, you have made a profit/gain of £100K after the sale and CGT may be payable on this amount. However, if the asset had a market value of £50K when you bought it and a market value of £250K when you sell it, you have made a profit/gain of £200K, again CGT may be payable on this amount. This is subject to certain other allowance deductions and the exemption referred to above.
The amount you receive at the point of disposal is not the figure used to calculate the tax, it is the ‘gain’ you make that is taxed by HMRC.
How do Capital Gains relate to property?
Capital Gains are not normally payable on your primary residence (but there are situations when it is applicable). However, if you own or part own a second property, CGT will be payable when you dispose of it.
What are the current limits and what is changing?
In Scotland, all individuals are allowed to make some capital gains before tax is due. This limit is currently £12,300 but in April 2023, this is dropping to £6000.
What are the time limits for advising HMRC about the gain?
You normally have 60 days from the completion of the disposal of the asset to both tell HMRC and, crucially, to pay the CGT.
What should I do if I want to find out more?
If you are thinking of disposing of a property that isn’t your primary residence in the next few weeks, you may want to consider this change when choosing a target date to complete the disposal. The CGT is calculated on that date. We can help clients with conveyancing of property. Fill in the form on this page and one of our team will be in touch to help you.
However, we stress again, CGT legislation is incredibly complicated and we offer this article to highlight a forthcoming change in the tax threshold. We would strongly advise seeking advice from a qualified independent advisor if you want specific advice on CGT.