Avoid These 5 Common Capital Gains Tax Errors
Every year, taxpayers face additional tax, interest, and penalties due to simple errors in their capital gains tax returns. Let’s explore five common mistakes and how to sidestep them.
- Using the Correct Annual Exempt Amount
Ensure you use the correct annual exempt amount when calculating your capital gains tax. This amount, akin to the personal allowance, represents the gains you can enjoy tax-free each tax year. For 2024/25, it’s £3,000, down from £6,000 in 2023/24. Remember, it’s lost if not used within the tax year.
- Disposals of UK Residential Property
For gains on UK residential property, earlier payment and reporting deadlines apply. UK residents must report gains and pay capital gains tax within 60 days of completion. Exceptions apply if no tax is due, such as when the property is the taxpayer’s only or main residence throughout ownership.
- Private Residence Relief – Final Period Exemption
The final nine months (or 36 months for care home moves) of a property’s ownership are covered by private residence relief, even if the taxpayer no longer resides there. Ensure the correct final period exemption is applied and only used once in relief calculations.
- Lettings Relief
Lettings relief has changed since April 6, 2020. It’s now only applicable to live-in landlords who let part of their home while residing in another part. Ensure lettings relief is claimed accurately, considering factors like private residence relief and the £40,000 limit.
- Business Asset Disposal Relief
Formerly known as entrepreneurs’ relief, business asset disposal relief carries a lifetime limit of £1 million. This limit includes any amounts claimed under entrepreneurs’ relief, and it’s not an annual limit. Avoid confusion by understanding the lifetime limit and ensuring accurate calculations.
Need Expert Guidance?
Navigating capital gains tax can be complex, but with expert advice from Jon Davies Accountants, you can avoid costly errors and optimise your tax position. Contact us today to ensure your tax affairs are in order and maximise your tax savings.
Reach out to Jon and the team for expert advice and support. Let’s make tax simple together!
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