GUIDE TO UK CAPITAL GAINS TAX AND SA108 FORM

Guide to UK Capital Gains Tax and SA108 Form

Guide to UK Capital Gains Tax and SA108 Form

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Capital Gains Tax (CGT) is a tax on the profit when you sell or dispose of an asset that has increased in value. It's the gain you make that's taxed, not the total amount of money you receive. Understanding CGT and how to report it using the SA108 form is essential for individuals, investors, and businesses in the UK who own assets such as property, shares, or investments.

What is Capital Gains Tax?


Capital Gains Tax applies when you sell, give away, exchange, or otherwise dispose of an asset. Some common assets that may be subject to CGT include:

  • Property (excluding your primary residence)

  • Shares (not held in ISAs or PEPs)

  • Personal possessions worth over £6,000, such as artwork or jewellery

  • Business assets


Not all gains are taxable. For instance, you won’t need to pay CGT on gifts to your spouse or civil partner, or on gains made from selling your primary residence, provided you meet certain conditions for Private Residence Relief.

Capital Gains Tax Rates


The rate at which CGT is charged depends on the type of asset and your personal income tax band.

  • For basic rate taxpayers: If your taxable income and gains are within the basic rate band, you’ll pay 10% on gains from assets (excluding property) and 18% on residential property gains.

  • For higher and additional rate taxpayers: The rates increase to 20% on other assets and 28% on residential property gains.


These rates apply after deducting your Annual Exempt Amount, which is £6,000 for the tax year 2023-24. This exemption means you only pay CGT on the portion of your gain that exceeds this threshold.

When to Report Capital Gains


If you sell assets and your total gain exceeds the annual exempt amount or if the total amount of the assets you sold is more than four times the exempt amount, you must report your gains to HMRC. This is done through a Self Assessment Tax Return, specifically using the SA108 form for Capital Gains.

Understanding the SA108 Form


The SA108 form is a supplementary page of the Self Assessment Tax Return, designed to help you report any capital gains made during the tax year. Whether you’ve sold shares, property, or any other qualifying assets, the SA108 form ensures you accurately report the gain, so HMRC can calculate your tax liability.

Key Sections of the SA108 Form:



  1. Personal Details: This section includes your name, address, and unique taxpayer reference (UTR) number. You need to ensure these details are correct as they connect your form to your overall Self Assessment submission.

  2. Details of Disposals: Here, you will list the assets you’ve disposed of. You need to provide information such as:

    • Date of disposal

    • Description of the asset (e.g., residential property, shares)

    • Amount received from the sale

    • Acquisition cost (how much you originally paid for the asset)

    • Any allowable expenses related to the sale (e.g., legal fees, improvements)



  3. Exemptions and Reliefs: You can claim various exemptions or reliefs to reduce your CGT liability. For example:

    • Private Residence Relief for your main home

    • Entrepreneurs’ Relief for business owners

    • Gift Hold-Over Relief for certain gifts



  4. Calculation of the Gain: Once you’ve input the relevant figures, the form helps you calculate the overall gain or loss. If you’ve incurred a loss, you can carry it forward to offset future capital gains.

  5. Taxable Gains: After deducting any reliefs and the Annual Exempt Amount, this section shows the gain that is taxable.


Filing Deadlines


Capital gains must be reported for the tax year in which the disposal occurred. For the 2023-24 tax year, the deadline for online Self Assessment submission is 31st January 2025. However, if you owe CGT from the sale of residential property, you must report and pay the tax within 60 days of the sale.

Common Mistakes to Avoid



  1. Not reporting all gains: If the total proceeds from your asset sales exceed four times the Annual Exempt Amount, you must report them, even if your gains are within the exempt limit.

  2. Missing the deadline: Late filing results in penalties, so make sure to submit the SA108 form on time.

  3. Not claiming reliefs: Failing to apply available reliefs like Private Residence Relief or Entrepreneurs’ Relief can lead to paying more tax than necessary.


How to Submit the SA108 Form


The SA108 form can be submitted online through the HMRC website as part of your Self Assessment Tax Return. If you file by paper, the SA108 must be attached to your SA100 form. Be sure to keep records of all your transactions, including receipts, legal documents, and any correspondence related to the sale or disposal of assets.

Conclusion


Understanding the UK’s Capital Gains Tax and the SA108 form is crucial for anyone selling assets. By properly reporting gains and making use of available reliefs, you can ensure you stay compliant with HMRC while minimizing your tax liability. Always seek advice from a tax professional if you’re unsure, as mistakes can lead to unnecessary tax bills or penalties.

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