Guide: UK Capital Gains Tax and SA108 Form
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Capital gains tax (CGT) applies to gains made on the disposal of an asset. However, there are exemptions and reliefs available for CGT.
For people reporting capital gains, they may need to use the SA108 form, alongside their self-assessment tax return. In this blog we explain Capital Gains Tax (CGT) and whether you will need to submit a SAT108 form.
Let’s start with some of the basic information you may need to understand about Capital Gains Tax.
What is capital gains tax?
Capital gains tax (CGT) is simply the amount you pay on any profit you make when you come to dispose or sell an asset that has increased in value i.e. you’ve made a profit or ’gain’ on the sale of the asset. You will need to pay capital gains tax where the overall gain for the year exceeds the annual exempt allowance (see below).
Disposing of an asset
Disposing of an asset includes:
What do I pay capital gains tax on?
Capital gains tax will be due when you sell of dispose of the following:
These are known as ‘chargeable assets’.
If you sell or give away crypto assets (like cryptocurrency or bitcoin) you should check if you have to pay Capital Gains Tax .
Capital gains tax rates
Higher or additional rate taxpayers
From 6 April 2024 the rates for a higher or additional rate taxpayer are:
(For disposals before 6 April 2024, the rate for gains from residential property was 28%).
Basic rate taxpayers
If you’re a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets. To calculate CGT, do the following:
1. Work out how much taxable income you have for the tax year (The tax year runs from 6 April to 5 April the following year). This is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.
2. Work out your total taxable gains.
3. Deduct your tax-free allowance from your total taxable gains.
4. Add this amount to your taxable income.
5. If this amount is within the basic Income Tax band, you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on residential property) on any amount above the basic tax rate.
Business asset disposal relief (BADR)
BADR applies to the sale of a trading business carried on as a sole trader or partnership, or to the sale of shares in a trading company. It can also apply to personally held assets that have been used in the trade of a partnership that you are a partner of or a company that you are a shareholder in.
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The rate of capital gains tax for gains from shares is 10%, where the total taxable gains and income is less than ￡37,700. Any excess gains if you sold shares are taxed at 20%. Where ‘Business Asset Disposal Relief’ (BADR) applies, the rate of tax on the whole gain is 10%, subject to a ￡1m lifetime allowance.
The 10% and 20% rates also apply to gains on commercial property but gains on residential properties are taxed at the higher rates of 18% and 28%.
When do you not have to pay capital gains tax?
You will only pay CGT on total gains above the annual tax free allowance (the annual exempt amount). The capital gains tax free allowance for individuals is ￡3,000 (The annual exemption for 2023/24 was ￡6,000, however, it was reduced to ￡3,000 from 6 April 2024).
For trustees, the annual exempt amount is ￡1,500 (This was ￡3,000 up until 5 April 2024).
This is a ‘use it or lose it’ exemption; it cannot be carried forward to future years. Where possible, it can make sense to crystalise gains each year to the extent of the annual allowance.
How do I report and pay CGT?
You may get a capital gains tax bill, but if you don’t, you will need to work out your total gains that are above the tax free allowance and then report and pay tax on your gains via the HMRC website or on Form SA108.
Deadlines to report and pay capital gains tax owed
Date of sale (or ‘disposal’) and Deadline to report and pay
For UK residential property sales in the UK with a completion date on or after 27 October 2021 - Within 60 days.
For UK residential property sales in the UK with a completion date between 6 April 2020 and 26 October 2021 - Within 30 days
If you have other gains to report - In the tax year after you sold or disposed of an asset if you use a Self Assessment tax return . If you’re eligible, you may be able to use the ‘real time’ Capital Gains Tax service to report by 31 December in the tax year after the sale
Changes to capital gains tax in Spring 2024 Budget
The Chancellor announced a 4% reduction in the higher rate of Capital Gains Tax (CGT) on residential property gains, decreasing from 28% to 24% for disposals on or after 6 April 2024. The lower CGT rate remained at 18%. Private Residence Relief (PRR) continues to apply on qualifying disposals of main residences.
The SA108 form: how to use it to file your Capital Gains Tax
The SA108 form is a supplementary section to a paper Self Assessment tax return. The SA108 form is used to declare profit on the disposal of an asset while filing a paper tax return.
Note: This form is only for paper tax returns.
Before completing the SA108 form, download and read the capital gains summary notes for the appropriate tax years for which you’re submitting.
Do I need to submit an SA108 form?
Only if you submit a paper format tax return.
Do I need to use SAT108 form if I submit my Self Assessment tax return online?
No, you will not be required to submit a SA108 form if you file your self assessment online. However, you are still required to declare your profit or gain from the sale of assets if you file your self assessment online. This is done under the ’tailor your return online’ section of the online self assessment form. When this is completed, the online form will create a field to declare your capital gains tax.
How do I submit an SA108 form?
If you file paper tax returns and you have a capital gain to declare, you’ll need to download the SA108 form from the HMRC website. There are various versions of the form for different tax years, so ensure you use the correct form for the tax years that you’re reporting.
Once you’ve completed all the information required on an SA108 form, submit it along with your main self assessment tax return form and any other supplementary pages to the address shown on the main form.
How dns accountants can help
Our tax advisors have a vast knowledge of tax obligations, tax legislation, tax returns and capital gains tax. Contact us today if you require more help and advice on submitting your tax return, CGT or any other tax questions or tax planning advice. Contact dns on 03300 886 686 or email us on [email protected] .