Technical refresher - Marginal gains

Technical Connection explains the current reporting rules for capital gains

With the end of the income tax year approaching, and speculation that the capital gains tax (CGT) rates may be increased, we thought a review of the reporting requirements for capital gains might be appropriate.

Capital gains must generally be reported by 31 January following the tax year in which they arise. This is the case whether or not a tax return is issued to the taxpayer. If there is any CGT to pay, this must generally be paid by that date too.

Since 6 April 2020, a UK resident disposing of a residential property in the UK making a gain that is liable to CGT, such as a buy-to-let property, has 30 calendar days from the date of completion to tell HMRC and pay any CGT owed, using a new online service. The gain will also have to be reported as part of the self-assessment return for the tax year in question, so that the correct tax liability can be calculated.

Non-UK residents must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a CGT liability, within 30 days of completion of the disposal. This includes disposals of residential properties, non-residential properties and indirect disposals.

The current main reporting limits for individuals, personal representatives and trustees are as follows:  

(a) Individuals and personal representatives

Individuals and personal representatives will not have to complete the CGT pages of a tax return if:

(i) Their chargeable gains for the tax year in question do not exceed the annual exempt amount (AEA), which is currently £12,300 (2020/2021).

(ii) Their total proceeds from chargeable disposals do not exceed four times the AEA (currently £49,200 for 2020/2021).  

(b) Trustees

The above rules are modified for trustees as follows:

(i) In (a)(i), the AEA will be that available to the trustees. For most trustees this will be one half of the AEA for an individual (£6,150 for tax year 2020/2021); the full AEA for certain trusts for the disabled; and a proportion of £6,150 (but never less than £1,230 for tax year 2020/2021) where a settlor has created more than one "qualifying" settlement after 6 June 1978.

(ii) In (a)(ii), the AEA “total proceeds from chargeable disposals” figure is £12,300 (2020/2021).

For the purposes of the above, chargeable gains means, where there are allowable losses (current year or brought forward), chargeable gains less allowable losses.

For the purposes of the above, chargeable disposals are those other than a disposal of an exempt asset or a disposal between spouses/civil partners living together, which is treated as being on a "no gain/no 
loss" basis.

These are the rules that are currently applicable under self assessment. Prior to self assessment, meaning before 6 April 2003, certain gains had to be disclosed even if there were no actual chargeable gains because the asset was exempt or the amount of the gain fell within the annual exempt amount.

A CGT return needs to usually be completed if the taxpayer wishes to claim an allowable CGT loss. For those who have never made a capital gain and are not registered for self-assessment, it is possible to write to HMRC instead. A loss does not need to be reported straight away – it is possible to make a claim up to four years after the end of the tax year in which the taxpayer disposed of the asset.

Technical Connection

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