Disclosure of Capital Gains Tax Liability on Share Sales
Required by HMRC ...
Posted by Roger Eddowes on 22/02/2024 @ 8:00AM
Capital Gains Tax is applied to the profits made from selling assets such as property, investments, and shares. Let's take a look at CGT and how HMRC prompts disclosure of CGT liability on the share sales ...
Stay informed and stay on top of your Capital Gains Tax obligations to avoid any issues with HMRC!
Firstly, it is essential to understand the basics of CGT. In the UK, individuals are entitled to a Capital Gains tax-free allowance of £6,000 for the 2023/2024 tax year. This means that if the total gains from selling assets are below this amount, no CGT is payable.
"This CGT allowance reduces to £3,000 from the 6th of April 2024!"
Now, let's focus on the sale of shares and how CGT applies. When an individual sells shares, they are essentially disposing of an asset and making a profit. This profit is subject to CGT. However, the amount of CGT payable can vary depending on various factors, such as the type of shares sold, the length of ownership, and any reliefs or exemptions that may apply.
So, how does HMRC prompt disclosure of CGT liability on the sale of shares? The first step is to determine the correct amount of CGT payable. This can be a complex process, especially if the shares have been held for a long time or if there have been multiple share transactions. Seeking professional advice from a tax advisor or accountant can help ensure the correct calculations are made.
Once the CGT liability has been determined, it must be reported to HMRC. If you already complete a self-assessment tax return, the share sale must be reported in the relevant tax year and any tax due is paid by the 31st of January following the end of the tax year.
The tax return includes a section specifically for reporting capital gains, including gains from the sale of shares. It is essential to accurately report the gains and any reliefs or exemptions claimed to avoid any issues with HMRC.
HMRC also offers a real-time Capital Gains Tax service which allows you to report gains (excluding residential properties) by the 31st of December following the tax year in which the gain took place. This does not replace the self-assessment tax return reporting requirement if you are already registered to complete one.
It is worth noting that HMRC also has the power to investigate and challenge any CGT calculations reported. Therefore, it is crucial to keep detailed records and documentation to support the calculations and any reliefs or exemptions claimed.
"Understanding and complying with HMRC's disclosure requirements for CGT on the sale of shares is crucial!"
It is essential to accurately calculate the CGT liability, report it correctly, and meet the deadlines to avoid any penalties or interest. Seeking professional advice can help ensure compliance and potentially reduce your tax liability through reliefs and exemptions.
Stay informed and stay on top of your Capital Gains Tax obligations to avoid any issues with HMRC.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about disclosing your Capital Gains Tax liability to HMRC, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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