How To Report A Capital Gain To HMRC via Self Assessment Tax Return

welcome back to tax to you the Practical tax Channel where we answer all of your tax related questions today I'm going to be showing you how to complete the 2223 self-assessment tax return if you need to report a capital gain to do this I'm going to cover a walk through of how to tailor your return a demonstration of the entries that you'll need to make under the capital gains section and I'll give you an explanation of the tax calculation for capital gains so if a capital gain is your only income for the tax year that should cover the entire return from start to finish before we do get into it though don't forget to like the video and subscribe for more helpful tax content submit your questions in the comments below and we'll endure to get them answered either in the form of a reply or possibly a dedicated video like this one you can also find us using the link below because although our aim is always to educate our clients as much as possible and share share this information with you we understand that tax can be confusing stressful and time consuming that's where we can step in and help check out the thousands of reviews on trustpilot from clients who trusted us to do just that so how do we tailor the return to declare a capital gain okay so here I am I'm logged into my government Gateway account and you can see I'm under the tailor your return section of the return that's section three over here if you're looking at the right hand toggle from here I just need to first of all set up the return in order to declare a capital gain so that the return automatically picks up only the capital gain section I don't want to be giving information about employment income and self-employed income if I don't have it so to do that in our example I'm only going to declare a capital gain and I'm going to ignore all of the other sections so the first question were you an employee or agency worker in the year I'll say no if you do obviously have these types of income you'll need to add them alongside the capital gain but to keep the example very simple we'll say no to these again no to self-employment Partnerships I'll say no a partnership is just two or more self-employed individuals working together typically they'll be under a partnership agreement so that one won't apply any income from UK land or property that's going to be your rental income or airbnbs that kind of thing will go on this section if you received any foreign income do you need the foreign section okay so maybe if you worked abroad or you have Investments abroad you could have income from outside of the UK and then at the bottom this is going to be the question that relates to us that relates to the capital gain section and if you do need to complete this section then you'll say yes here and then I'll save and continue on to page two and on page two it's just going to be more questions trying to determine what types of income you had during the tax year again we're looking at the 2223 tax year now but it's pretty much the same setup um across each different tax year did you receive any interest I'll say no but that's going to be Bank interest Building Society that kind of thing if you have loans with people and they're paying you interest on that loan potentially it could fall under that section dividends if you own shares in companies enlisted companies or any companies for that matter did you receive any UK pension income so pensions are taxable income as well even though you're encouraged to save into a pension scheme and they can be really tax efficient when you do draw down money from a pension a lot of that money will actually be taxable especially when you're taking it as a annuity did you or your partner get child benefit again we're saying no to all of these but they ask about child benefit because if either you or your partner receive it and either of you are a higher earner meaning more than 50 000 pounds of income and then at that point they start to retract the child benefit they take it back and by the time you get to sixty thousand pound of income they've actually retracted it in full so there's no Financial benefit to having the child benefit if you earn or your partner earns more than sixty thousand pound and that charge will always lie with the the higher earner in that case did you incorrectly claim an amount of covered support payment I'll say no it's becoming less likely as we move through tax years post pandemic that one's becoming less likely now but you do have the option to declare that you incorrectly or falsely claimed it and you can pay that back did you receive any other UK income so this is kind of wrapping up anything that hasn't been covered by the questions we mentioned already have you made any income tax losses say no these income tax losses people get confused with these these actually relate usually if you if you follow the guidance it will tell you that they normally relate to your other UK income this isn't for self-employed individuals who have made a loss um that's a there's a different question liable to pay pension savings tax charges you normally have to pay these where you save too much into a pension scheme either too much in a tax year because you can only save up to your gross earnings um or 60 000 pound whichever is the the lower figure normally um or you could pay too much in overall and you could have more than I think it's 1.05 or 1.07 million in your pension pot you may have to pay a tax charge on that as well so it's for again higher earners higher Savers save and continue and then the last page of tailoring your return page three did you make contributions towards a personal pension plan or retirement annuity so personal pension plan is just one outside of your employment that you set up yourself quite often or occasionally there can be additional tax relief usually for higher earners um that can be applied for through a tax return so if you are a higher earner higher rate taxpayer or additional rate taxpayer it's important that you declare it on a tax return here that you've made those contributions to a personal pension plan because you can get some money back and similar situation for charitable contributions if you give money to a registered charity and you're a higher or additional rate taxpayer then there can be some additional tax savings by declaring it on here if you or your spouse or civil partner born before 1935 do you want to claim married couples allowance you'd need to be more than 87 88 years old for that one to apply but the one below is more likely transferring 10 of your personal allowance to your spouse or civil partner that's usually good if one of you is a basic rate taxpayer and the other maybe doesn't earn or just crosses the threshold then by transferring some of your personal allowance to your spouse or civil partner they can earn more money tax-free so as a couple you end up paying less tax do you want to claim other tax relief so that again just a wrapping up question you can see here details of uh investment tax relief Venture Capital trust shares maintenance or alimony payments it's going to be a bit rarer that one have you had any 22-23 income tax refunded or offset by us or job center plus I always get asked about this one if that includes Universal Credit Universal Credit does not go in here it's not taxable income and it doesn't need declaring on a tax return did you have a Tax Advisor if you have someone helping you of your tax calculations and you're paying for that service you may want to give details here have you used one or more tax avoidance schemes so a tax avoidance scheme normally comes with a reference number hmrc are normally aware of it already and you actually if you're using it you have to declare that reference number and that you're using it to hmrc here and then they'll go and investigate and try and shut it down and try and get the money back from you normally as well are you acting in capacity on behalf of someone else no I'm completing my own tax return but if you are you can declare that here and then save and continue now before we go any further if that does seem like too much hassle or maybe you need some assistance with your tax return don't forget to check us out attacks2u.co.uk our prices start from 50 pound Plus v80 for a basic self-assessment tax return which includes one of our accountants preparing and submitting your tax return to hmrc you can book this via our website using the link below now let's move on to completing the capital gains section of the tax return now that we've actually tailored the return for our circumstances I can now complete the capital gains section so from here you can see I'm on section four fill in your return and I can just scroll down anything entered in blue where it says entered here that means I've completed that section and then just below the sections I've told them about the income that I've told them I have will be generated below so in this case I only said capital gains but if I did have employment income self-employed income whatever it might be those would all be populated here and you could work through them so I'll start by clicking on uh the first link under the capital gains header and then I'm going to be presented with a little bit of information about what I need to provide and how to complete it and then a bunch of questions I'll need to work through so the first question is did you dispose of chargeable assets worth more than 49 200 pound I'm gonna say no we'll do a basic example where my proceeds from sale are less than this however it's worth pointing out if you click on the the link below you'll get a bit of additional information but essentially if you dispose of assets worth more than 49 200 pound then you'll normally need to complete the capital gains section anyway and that's important because even though you've disposed of maybe a 50 Grand asset you may not have made any money on it you may have broke even you may have made a loss but that is a trigger to complete this section anyway so even if that's the case if you haven't made any money HMR steel hmrc still want to know about larger disposal so just bear that in mind here our losses deducted again I'll say no so typically in a taxi you might dispose of some assets where you make a capital gain you make some money a profit on the disposal you sold it for more than you purchased it for and you might dispose of some assets where you make a loss you sold it for less than you purchased it for typically the rule is that any losses are offset against gains in the same period okay so if you do have the two you need to kind of combine them together and you would tell them you would tell hmrc by the way I've already deducted some losses in the current tax year again in this example I'll assume that I've only got capital gains in the year and I haven't made any disposals that resulted in a loss and then the last question are your taxable gains more than twelve thousand three hundred pound twelve three hundred that is the that is the threshold for capital gains or that is the allowance for capital gains tax-free allowance in the 2223 tax year which is one that I'm completing in the following tax year that will drop down to about six thousand pound in their tax year after down to about three thousand again so your capital gains tax allowance is really getting hit over the next couple of years uh but that's why they're asking this question here so I'll say yes I've got gains of more than twelve thousand three hundred pound if I say no it's likely that I won't actually have to complete the the capital gains section at all because there wouldn't be any trigger here okay so I'll say yes Save and continue and on to the next page again a bit more information here it's worth having a read through this as you're presented with each page in particular this section so usually on a tax return for lots of different income tax you can just provide the numbers if you say hey I had self-employed income 100 000 income uh 50 000 expenses my profit is 50 Grand hmrc are quite happy to take that as given unless you have an investigation they don't really care about the backup behind the numbers capital gains it doesn't really work like that you need to provide a little bit more information so you can see here you must provide a computation for each disposal of an asset which is not an exempt asset so there's lots of exempt assets so it could be your house for example your principal private residence the one that you live in it's normally exempt from capital gains your car is normally exempt from capital gains any assets you hold within an Isa an individual savings account I normally exempt as well anything else or most other assets or potentially chargeable assets okay and that's what they're talking about here you may be able to use our capital gains computation worksheet to help you calculate the gain or loss on the disposal of an asset but it cannot be used in all circumstances this is down here I'm reading so if you scroll down you can see and again you can look at the detailed guidance but it gives you a good idea here you can't use the working sheet if you've got your asset by the exercise of an option the disposal is a part disposal and then you have to add together your gains or losses to find the total gain that you want to claim Badr on business asset disposal relief so what they're saying is they have a basic computation a basic worksheet for very simple disposal of an asset I bought this one asset I sold it over here I made this much money that's very simple if it's any if it's more complicated than that I bought two of these assets I then bought another one a year later disposed of one of them it's too complicated you won't be able to use their computation anymore so just bear that in mind if you can't use their computation then you'll need to provide something an Excel document detailing exactly what's taking place in the transaction and typically in the computation you're going to have um the dates of the transactions when you purchase it how much you purchased it for if there were any costs involved with that purchase if you then improved on the asset maybe you bought a house and you did an extension on it um your disposal when you actually got rid of it the date the amount you disposed of it for and any cost involved with disposing those are all details that needed to be that need to be provided in the calculation do you want to use the capital gains computation worksheet for your disposals again if you've got your own worksheet then you can attach that I'm going to say yes I'm going to put in a couple of very basic capital gains or disposals so we'll use their computations and then it's a case of putting in the details for each disposal so in this case your reference for this disposal so I will go with some shares let's go with Tesla shares and we can select a category from below so these are listed shares and securities you can find them listed on the NASDAQ I think so we'll select the most appropriate category and then you can just provide a description of the asset the number of shares 100 shares in Tesla that's what I dispose of you don't need to go into great detail but if it is a more obscure asset maybe a painting maybe an antique that kind of thing you can provide that detail here the date of the disposal so I'll go with a date within the tax year so if we go with the uh the fourth of the 7th 2022 that will fall within the 22-23 tax year and then the proceeds that we received for those shares so I don't know what Tesla shares cost at the moment or or a value that will put in sort of twenty five thousand for our 100 shares any costs it on dispose or so typically this is the cost associated with disposing of your asset so in this case with shares it could be that I had to pay an agent a commission of a hundred pound to get rid of those shares to sell them so that's an incidental cost on disposal and it'll bring my proceeds down to 24 900. we'll then need to provide a date of acquisition so let's go with 2013 so we've held them for 10 years or nearly 10 years or so and then cost or market value below so the cost is quite easy if I purchase them for let's say 2 000 pound back then that's quite easy if you're gifted an asset or you receive it by some other means then sometimes you won't have a cost in which case you'll normally need to use the market value at the date that you you took ownership or you received them incidental costs and acquisition so again I might have had to pay maybe 50 pound to an agent to acquire those shares back then and again that will get deducted off my total added on to my total cost Improvement cost so the best example for improvement costs probably on on a house if you purchase a second house Airbnb or a rental property that kind of thing that's normally a chargeable asset and and falls under capital gains when you dispose of it if you've done an extension on that house potentially that's an improvement cost providing that extension is still in place at the time you come to dispose of the asset then you may be able to include that here with shares it's very unlikely that you would actually have any deduction if any in respect of reliefs and elections you can look at what reliefs and elections are available these are just for the disposers of some shares I hold so there won't be any in this case and then a description if you are claiming any of those reliefs you can provide a bit of detail below about why so my total gain on that disposal is 22 850 pound I can then from here add another worksheet if I wish to which I will do in this case and work through another disposal so in this case I'll say I've disposed of a painting a different asset type so I'll look for a category that fits probably other property and then I can just provide a bit of a description as to what I've actually sold so in this case I'll just put it some antique painting and frame and then continued to enter the details of each transaction so exactly as we did before you want to provide the date of the disposal so if we went with the 10th of the 10th 2022 and let's say we dispose of it for 5 000 pounds maybe we had to pay again a fee 500 pound on sale the date of acquisition so we could go with the 1st of March 2020 whenever it might have been the cost on acquisition so I'll go with three thousand pounds I've only made a small gain on this one any costs on acquisition I'll say no and then Improvement costs again unlikely on this one just bear in mind maintenance costs maintenance wouldn't count as a Improvement cost you need to actually be improving the asset not just maintaining its current form so you can see I've made 1 500 gain on this transaction no reliefs so no description at the bottom of those reliefs and then I will save and continue and then we're presented with the worksheet so this details all of my disposals all of my gains I've got my listed chairs in here with a total gain of 22 850 and then below that I've got other property which will be my painting and I made a gain of 1500 pound there from here you can then either confirm that you're happy so I'll say no I'm happy to use these figures do you need to dispose uh detail disposals or gains which have not been included in the worksheet above if I'm happy that these are my only disposals I'll say no if maybe I had disposals which I can't use this worksheet for remember you can't use it for everything it's maybe it's too complicated then I could say yes and then add in my own figures and computations as well but I'm happy so I'll save and continue and then you can see this summary page here for the disposal of shares and securities first of all so again you're just checking the details everything's pre-populated here disposal proceeds to 150 of course leave a move a gain of two to eight fifty this is the entry that will go across to hmrc there are no losses remember I told them there are no losses that have been deducted any claims and elections no and then you'll do the same for your second disposal in this case I'm happy with everything in here so I'm confirming no claims or elections and then move on this is a chance to make any adjustments or offset any losses so we've got a total gain of 24 350 at the moment losses set against the 22-23 capital gain so these are losses brought forward and unused uh sorry and used in the current year so the thing with capital gains is if you make a loss providing you declare it to hmrc you can just carry that loss forward indefinitely if it takes 20 years that's fine when you eventually make a gain you can offset that loss against current year gains so if I was carrying forward a 5 000 pound loss I can enter that in here and that will reduce my total gain down by five thousand pound income losses of 22 23 set against gains so if you make a an income tax loss you can potentially offset that against the gains it's not going to apply to this example but you'll find all the details in the link below and then at the bottom losses available to carry forward so with capital gains it's an interesting one so if you had let's say 20 000 of losses brought forward you only have to reduce your total gain this one up here down to the current year allowance so in 2223 the allowance was 12 300 pound so if I had 20 000 of losses brought forward I can use part of those losses to bring this down this figure down to twelve thousand three hundred so I'll do 24 350 less 12 300. and I would enter the difference in this box here anything that then remains I can just carry forward now the good thing about that is you're not you're not over using your losses you're not having to to use them and sacrifice your allowance as well you can use both of them really effectively so make sure you're doing that appropriately and you're making use of those losses I'm Gonna Leave five thousand in there so we would expect this gain to drop down to sort of 19 350 pound I'm not going to carry forward any more losses we'll assume I only had five thousand and I've used those in full here losses used against an earlier years gain so this one is going to be a little bit rare so it actually tells you below special circumstances only um again you can look at the description here but it's not going to apply to my situation gains qualifying for investors relief so this is normally where you're investing in unlisted companies smaller companies Tesla is not an unlisted company so I'm not going to qualify for that gains qualifying for Badr business asset disposal relief that normally applies to assets held within a business for a certain period of time or used within a business or if you're self-employed and you've built a business up when you dispose of it you can often claim Badr and get a reduced rate it used to be called entrepreneurs relief you can see down here it won't apply to this situation if you are claiming the ADR there's also a lifetime allowance so you can only claim a certain amount in your lifetime so you need to declare if you have claimed that previously and then at the bottom we've got adjustments to capital gains these adjustments are going to be pretty rare so I'm not going to put anything in here again you can see below additional liability for non-resident or dual resident trust we're not a trust so these are not going to apply do your computations include any estimates or valuations I'll say no I'm happy that these are final figures you can use estimates or valuations but if you do hmrc you're going to expect you to come back and correct this at some point because they want the final figures you'll need you'll usually need to give details of why you're only using an estimate as well save and continue this page excluded index Securities and qualifying asset holding company qahc returns so this is not going to apply to this situation we're selling shares in Tesla it's pretty straightforward and a painting we're not looking at index Securities you can go away and and have a look at what these are they're not going to apply to many people and you can see this whole page relates to index Securities and qahc so I'll save and continue but I can just leave all of these blank and then any other information so this is known as white space so you can enter any information in here the somebody reviewing your return may find useful but only information that relates to your capital gains so if I had income from employment and capital gains I wouldn't provide any any information about the employment in here it's not going to be at the right place for it you would do that under that section so only about capital gains and only where it's useful if you're declaring a very simple gain like I have here they're not going to have any questions about it it's really straightforward so why give them a load of extra information that's going to flag up that they're going to need to then review but if you know that there's something in your game that someone's going to look at and think well that doesn't make sense and you know it's going to be a question you might want to explain away that question and answer it before they trigger an investigation okay I'll leave it blank save and continue and now we're on to the usual questions that anybody completing a self-assessment tax return would have to complete so we'll just fly through these these don't actually relate to the capital gain section but everyone will need to complete them and here we're being asked about underpaid tax from earlier tax years is this figure correct if it's zero there's no underpaid tax then you'll just say yes similar question on the next page again I'm happy that this is zero so I'll save and continue and again outstanding debt included in your tax code if it's zero then you can enter zero in this box here if you have overpaid tax then you can give details of your bank account or or home address to get a check sent to you in this case I'll have a tax liability so I'm going to leave that as not applicable save and continue and then these next questions are where you're going to have a tax liability for this tax year that you're submitting 2223 or below that 23.24 do you want that liability to be deducted from your tax code adjusted in your tax code and collected through there but you can only do it if your liability is below a certain threshold three thousand pound in this case I'm saying no to both I'm happy to pay the liability and then I'll save and continue adjustments to tax due are going to be very very rare so I'm going to leave these blank save and continue and then does your return contain provisional figures so I'm happy these are final figures and I'm going to continue save and continue a bit more white space but this is just general white space so if you have anything related to your general um self-assessment then you can enter that here and no attachments save and continue and that is US finished with all the entries needed for the capital gains section of the tax return now just remember what we've demonstrated here is how to report a basic capital gain to get to this point of course you need to work through your asset disposals and calculate the gain or loss on each one and of course that in itself can be difficult so if you want one of our agents to help you with the calculation you can book via the link below now let's look at the tax calculation so I'm happy here that I've made all the entries needed and now I want to look at how much tax is owing I can do that by scrolling to the bottom of this page just making sure that everything is marked as entered if it isn't then it's going to highlight on here that I need to return to a particular page or section I can click click on next and then this is a summary of what needs paying so in this case you can see here the total amount due for the 22-23 tax year is 705 pound now anyone who completes a tax return may already know that typically if this figure here is more than a thousand pound then what hmrc will do they'll ask you to start paying up front for the next tax year so in that case you normally pay as well as paying that liability up here you'll normally pay 50 again down here and then a following 50 or further 50 in July so with capital gains your income doesn't count towards those payments on account so even if I had a tax liability of ten thousand pound here they won't ask me to make payments on account just because of that because they know a capital gain is a one-off event you're not going to make a capital gain this year next year the following year like you would with self-employment or employment income so this won't actually count towards that that payment on account threshold and if you are wondering why it hasn't triggered that's normally the reason why so 705 pound payable by the 31st of January 2024 and if we want to know where that figure has come from we can scroll down to the bottom and we can view and print your full calculation to get the full details so in here you can see at the top we've got a personal allowance of 12 570 that won't apply in this situation unless I've got income from elsewhere you cannot use your personal allowance against capital gains it doesn't work like that you have a separate capital gains allowance so I'll scroll down this is the income section so if you have employment income self-employed income that kind of thing you'll see it detailed here and then below that down here you can see my capital gain being taxed so they're taxing me on seven thousand and fifty pound of capital gains now that's because they've already deducted 12 300 pound okay remember I had nineteen thousand odd pound of capital gains so my allowance has already been deducted and then they're applying the appropriate tax rate so this is going to depend on first of all your level of income if you're a basic rate taxpayer or up to the the end of the basic rate threshold you normally taxed at 10 if you're a higher or additional rate taxpayer it's normally 20 but if you're disposing of certain assets which is normally residential property um those rates are normally actually 18 for basic rate taxpayers or 28 for hire an additional rate taxpayers so it depends on your level of income and what you're disposing of but they will enter the correct tax rate based on the selection that you made back under the capital gains section 10 of 7050 705 pound so it's a very straightforward calculation and again you can see at the bottom of the page that that is due by the 31st of January 2024. after viewing this video you should now be able to tailor your tax return so it's ready to report a capital gain you should be able to complete the capital gains section of the self-assessment tax return and you'll understand the tax calculation and how to view it don't forget if you're having any trouble attached to you we provide an easy to use self-assessment service and would be happy to help whatever your situation just follow the link below that is all for today don't forget to check us out at tax2u.co.uk And subscribe to the channel for more helpful tax content thank you for watching see you next time

Channel: Tax2u Limited

Views: 16,256

Keywords: capital gains, how to report a capital gain, how to report capital gains, capital gians tax, self assessment, self assessment capital gain, CGT, capital gains tax, reporting a capital gain, disposal of shares, profit from selling shares

Id: Wryt1qVA6W4

Length: 33min 16sec (1996 seconds)

Published: Tue Jul 11 2023