Capital gains tax is a tax on the profit when it comes to selling an asset that has increased in value since you bought it.
Think property. You bought it for £150k and then sold it for £300k. You pay capital gains on the £150k increase in value.
Prior to April 2020, you report any gains on your Self Assessment Tax Return and pay the capital gains on 31 January following the end of the tax year. That changed in April 2020 with the Government giving you 30 days to report the gain and pay any tax on the sale of a residential property to HMRC.
But, as of the 27th October, you now have 60 days to report it. Great news, right? Well, kind of. Let us explain.
Tax, made simple
There is an Office of Tax Simplification (OTS). No, seriously.
They are an independent advisor to the Government on the simplification of the UK tax system. So if you ever thought to yourself that tax is overly complicated, remember that there is a body who actively works to make sure that isn’t the case…
Anyway, the OTS basically said to the Government that capital gains tax, especially when it comes to the sale of residential properties, is overly complicated and needs to be simplified. The Government agreed and then extended the window to reporting and paying capital gains tax on the sale of a residential property to 60 days from the aforementioned 30.
So far, so good.
But what if it wasn’t that simple?
The reality is that the Government probably got tired of people missing the 30 day deadline (like people selling their house don’t have enough to think about!) and moved it to 60 days to save themselves time and money on chasing people for payment.
Governments don’t generally give extensions out of the kindness of their heart…
So I have to report the gain twice?
Yes, you have to calculate the gain and an estimate of the capital gains tax so you can report the gain and pay the tax within 60 days of selling the property. However you also need to declare the gain and the tax due on your annual Self Assessment Tax.
You might think that the figures will be the same, however this is not necessarily the case. For example it may be that you have realised other gains or losses in the same tax year or your income is greater or less than anticipated all of which can have a bearing on the final capital gains tax bill.
This is where Ascendis comes in. We can ensure that your capital gains tax is properly calculated and that all reliefs and claims are made to ensure that you’re not paying too much (or too little) whilst complying with all of the necessary timeframes. Meaning, that you are not faced with the prospect of penalties and fines on top of the money you have to pay.