Understanding Capital Gains Tax in London: A Guide by City Gate Accountants

Capital Gains Tax (CGT) is an important aspect of the UK tax system, particularly for individuals and businesses dealing with the sale of assets. Whether you are selling property, shares, or other investments in London, understanding CGT can help you manage your tax liabilities efficiently. In this guide, City Gate Accountants provides insights into what CGT entails, how it is calculated, and ways to mitigate your tax burden.

What is Capital Gains Tax?

Capital Gains Tax is the tax levied on the profit made from selling an asset that has increased in value. It applies to various assets, including:

• Property (excluding primary residences)

• Shares and investments

• Business assets

• Personal possessions worth over £6,000 (excluding cars)

Capital Gains Tax Rates

The amount of CGT you pay depends on your taxable income and the type of asset sold. As of the current tax year:

• Basic rate taxpayers (income up to £50,270) pay 10% on most assets and 18% on residential property.

• Higher or additional rate taxpayers (income above £50,270) pay 20% on most assets and 28% on residential property.

It is crucial to calculate gains correctly and apply any available exemptions or reliefs.

Exemptions and Reliefs

Certain exemptions and reliefs can reduce CGT liability, including:

• Annual Exempt Amount – Individuals get a tax-free allowance (currently £6,000 for the 2023/24 tax year).

• Private Residence Relief – If selling your main home, CGT may not apply.

• Entrepreneurs’ Relief – Now called Business Asset Disposal Relief, reducing CGT to 10% on qualifying business assets.

• Gift Hold-Over Relief – Transfers of business assets or certain gifts can defer CGT.

How to Reduce Your Capital Gains Tax

City Gate Accountants advises the following strategies to legally reduce CGT liabilities:

1. Utilise Your Allowance – Ensure you make use of the tax-free exemption each year.

2. Spread the Gains – If possible, split asset disposals across tax years.

3. Transfer Between Spouses – Transferring assets between spouses is tax-free and can maximise allowances.

4. Invest in ISAs or Pensions – These are tax-efficient investment vehicles.

5. Claim Eligible Reliefs – Ensure you claim available exemptions and reliefs to minimise tax exposure.

Reporting and Paying CGT

CGT must be reported and paid within 60 days of selling a residential property in the UK. Other gains can be reported through a self-assessment tax return. Failure to report CGT correctly can lead to penalties, so professional tax advice is recommended.

How City Gate Accountants Can Help

Navigating CGT regulations can be complex, particularly in London’s dynamic property and investment market. City Gate Accountants offers expert tax advisory services to help individuals and businesses calculate, plan, and minimise their CGT liabilities. Whether you need assistance with asset disposal strategies, exemptions, or filing obligations, our experienced accountants ensure compliance with HMRC regulations while optimising tax savings.

For professional guidance on Capital Gains Tax in London, contact City Gate Accountants today and let our experts help you manage your financial future effectively.