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How to Work Out CGT

How to Work Out Capital Gains Tax (CGT)

Working out Capital Gains Tax on disposals the simple way. Find out how to make a report on a Self Assessment form and pay the tax bill to HM Revenue and Customs.

CALCULATE CGT: There is a simple way of working out if you need to pay Capital Gains Tax.

It may be due after the sale or 'disposal of' certain personal possessions or chattels and business assets.

CGT is due if the amount of all your profits and other taxable income, excluding any exemptions, is higher than your personal yearly tax-free Capital Gains Tax allowance.

The tax-free allowances are also called your Annual Exempt Amount. There are three basic steps for working out your total taxable gains.

  1. First, calculate the gain for each asset that you have sold (or disposed of). The tax year runs from the 6th of April to the 5th April that follows. Include any profit realised on property, personal possessions, business assets, or investment shares.
  2. Then, you should be able to find the total amount of all profits from the assets which got disposed of (or sold).
  3. The final step is to subtract all your allowable losses to find out how much CGT you need to pay.

Note: You must report and pay Capital Gains Tax if your taxable profits, minus your tax allowance, is a positive value.

If Total Gains are Less than Your Tax-free Allowance

As a rule, Capital Gains Tax would not be payable in cases where the net taxable gain is an amount less than your personal allowance. But, there are some exceptions to these rules. You still need to inform Her Majesty's Revenue and Customs if both of these apply:

Note: Write to HMRC if you are not registered for a Self Assessment tax return. Different rules would apply if you want to report a loss.

Non-resident Status

As a non-resident you do not need to pay tax on most types of Capital Gains. But, you must make a report if you sell (dispose of) your residential property. This rule also applies even if you make a loss or the gain is below your annual tax-free allowance.

If You Have Nothing to Report

If you currently do not fill in a Self Assessment form and are not registered, then there is no need to do anything at all. But, if you are using Self Assessment tax return forms you still need to complete the Capital Gains section by following these three steps.

  1. In the section marked 'Tailor your return' you should confirm that you are completing the Capital Gains portion.
  2. Under the section marked 'Details of Chargeable Assets' you should select 'No' for all questions.
  3. Send in your tax return form following the usual deadlines and regulations for Self Assessment.

How to Report and Pay Capital Gains

You can report payable Capital Gains Tax using the 'real time' service or your Self Assessment tax return. Non-residents must contact HM Revenue and Customs within 30 days of selling a UK residential property. This applies even in circumstances where there is no taxable payment due or liable.

Before You Make a Report

For each Capital Gain (profit) or loss that you report, you need to include your calculations. You must also keep records about the costs and the proceeds for each asset. If you qualify for any reliefs or other exceptions, you need to include these details too.

Note: You can get further help working out Capital Gains Tax rates or submitting a tax return from a tax adviser or an accountant.

How to Report a Gain and Pay Straight Away

UK residents can use the 'real time' Capital Gains Tax service. If you do not already have a Government Gateway account, you can set it up from the sign-in page.

You will need to upload PDF or JPG files if you use this service. The uploaded files must show how you calculated your capital gains and Capital Gains Tax.

When to Make the Report

You can use the 'real time' service straight after calculating your gains and how much tax you owe. There is no need to wait until the end of the current tax year.

HM Revenue and Customs will send a letter or an email to you after you report a gain. The letter will give you a payment reference number and informs you of several ways to pay.

Note: You must make a report by the 31st of December after the tax year when you made the gains. The UK tax year runs from the 6th of April to the 5th of April in the following year.

Tax Year after You Disposed of Assets

If you do not normally complete a tax return but have sold (disposed of) chargeable asset(s) you must register for Self Assessment by the 5th of October following the relevant tax year of the sale. A reminder letter gets sent out to those who have registered for Self Assessment. Contact HMRC if you do not receive a reminder letter.

Note: If you submit your tax return electronically, you must do it by the 31st of January. The deadline is the 30th of October for paper forms.

After You Send Your Tax Return

HM Revenue and Customs will inform you how much is owing for the year you have declared. You must settle your tax bill according to Self Assessment deadlines and penalties.

Important InformationThere are penalties for those who:

How to Work Out Capital Gains Tax: Report and Pay CGT in the United Kingdom