Pay Capital gains tax early?
Discussion
Sorry if this is a daft question. If you have cgt to pay by January 2026, is their any reason why you can't put it into your January 2025 tax return, to pay before rates increase?
Or will the rate in 2026 for gains in 2024 be payable at the rate prevailing at the time of the gain?
Sorry, I know it's probably a daft / amateur question.
Or will the rate in 2026 for gains in 2024 be payable at the rate prevailing at the time of the gain?
Sorry, I know it's probably a daft / amateur question.
It's the CGT rate that applies at the date of disposal.
So no, you can't do what you suggest I'm afraid.
Have you disposed of the asset already? If rates do change then it's unlikely they any change will be backdated, the change usually takes place from the point of announcement or a set date in the future, usually the 6th April.
So no, you can't do what you suggest I'm afraid.
Have you disposed of the asset already? If rates do change then it's unlikely they any change will be backdated, the change usually takes place from the point of announcement or a set date in the future, usually the 6th April.
Edited by _CrazyIvan_ on Monday 22 July 21:35
Mr Squarekins said:
Yes, asset disposed of in May. Ideally I'd like to paid cut now, rather than wait until 2025/26. Can I do that?
You're hurtng my head! As another poster mentions, the rate that applied when you sold the asset will be used, so it doesn't matter if it goes up in future.However, handily HMRC now "allow" it to be paid early if you want to: https://www.gov.uk/report-and-pay-your-capital-gai...
It says you still need to report it in your self-assessment, so I suppose if the Government went completely mad and did back date changes to CGT then filling in the SA would generate an extra liability.
There are different reporting and paying rules for Capital Gains Tax depending on whether the asset disposed of is a residential property or some other sort of asset.
The OP needs to clarify what type of asset he is refeferring to before anybody can offer him any meaningful advice on how and when he should pay the Capital Gains Tax arising.
Basically, if the asset is NOT a residential property, then Capital Gains Tax is reported, calculated and paid using the Self Assessment tax system.
If such an asset was sold today, the sale will have occured in tax year 2024/25. This means the filing deadline for the submission of the relevant self assessment tax return AND the payment of the Capital Gains Tax arising will be 31 January 2026.
If the asset sold is a residential property, then the tax payer MUST sign into HMRC's special Residential Property on-line reporting system and submit the details of the disposal, the arising gain and the Capital Gains Tax and PAY the Capital Gains Tax all within 60 days of the date of completion of the sale.
So, if the sale was completed today, they have until 21 September 2024 to file and pay everything.
Note, there is no "allow" about this. This is compulsory with fines and penalties if you don't do it.
Even after using the file and pay system, the gain has to be submitted again under the Self Assessment system too. However, the Capital Gains Tax is only paid the once
The OP needs to clarify what type of asset he is refeferring to before anybody can offer him any meaningful advice on how and when he should pay the Capital Gains Tax arising.
Basically, if the asset is NOT a residential property, then Capital Gains Tax is reported, calculated and paid using the Self Assessment tax system.
If such an asset was sold today, the sale will have occured in tax year 2024/25. This means the filing deadline for the submission of the relevant self assessment tax return AND the payment of the Capital Gains Tax arising will be 31 January 2026.
If the asset sold is a residential property, then the tax payer MUST sign into HMRC's special Residential Property on-line reporting system and submit the details of the disposal, the arising gain and the Capital Gains Tax and PAY the Capital Gains Tax all within 60 days of the date of completion of the sale.
So, if the sale was completed today, they have until 21 September 2024 to file and pay everything.
Note, there is no "allow" about this. This is compulsory with fines and penalties if you don't do it.
Even after using the file and pay system, the gain has to be submitted again under the Self Assessment system too. However, the Capital Gains Tax is only paid the once
Edited by Eric Mc on Tuesday 23 July 11:01
Eric Mc said:
There are different reporting and paying rules for Capital Gains Tax depending on whether the asset disposed of is a residential property or some other sort of asset.
The OP needs to clarify what type of asset he is refeferring to before anybody can offer him any meaningful advice on how and when he should pay the Capital Gains Tax arising.
Basically, if the asset is NOT a residential property, then Capital Gains Tax is reported, calculated and paid using the Self Assessment tax system.
If such an asset was sold today, the sale will have occured in tax year 2024/25. This means the filing deadline for the submission of the relevant self assessment tax return AND the payment of the Capital Gains Tax arising will be 31 January 2026.
If the asset sold is a residential property, then the tax payer MUST sign into HMRC's special Residential Property on-line reporting system and submit the details of the disposal, the arising gain and the Capital Gains Tax and PAY the Capital Gains Tax all within 60 days of the date of completion of the sale.
So, if the sale was completed today, they have until 21 September 2024 to file and pay everything.
Note, there is no "allow" about this. This is compulsory with fines and penalties if you don't do it.
Even after using the file and pay system, the gain has to be submitted again under the Self Assessment system too. However, the Capital Gains Tax is only paid the once
HMRC website implies that if you use their 'report and pay' / 'real time' capital gains service, that it then doesn't incur self assessment necessity? i.e. if you don't need to do SA for any other reasons, then report and pay means that CGT liability doesn't make SA necessary? (Although OP suggests he's into SA in his case).The OP needs to clarify what type of asset he is refeferring to before anybody can offer him any meaningful advice on how and when he should pay the Capital Gains Tax arising.
Basically, if the asset is NOT a residential property, then Capital Gains Tax is reported, calculated and paid using the Self Assessment tax system.
If such an asset was sold today, the sale will have occured in tax year 2024/25. This means the filing deadline for the submission of the relevant self assessment tax return AND the payment of the Capital Gains Tax arising will be 31 January 2026.
If the asset sold is a residential property, then the tax payer MUST sign into HMRC's special Residential Property on-line reporting system and submit the details of the disposal, the arising gain and the Capital Gains Tax and PAY the Capital Gains Tax all within 60 days of the date of completion of the sale.
So, if the sale was completed today, they have until 21 September 2024 to file and pay everything.
Note, there is no "allow" about this. This is compulsory with fines and penalties if you don't do it.
Even after using the file and pay system, the gain has to be submitted again under the Self Assessment system too. However, the Capital Gains Tax is only paid the once
Edited by Eric Mc on Tuesday 23 July 11:01
If you already complete Self Assessment tax returns, then you MUST redo the Capital Gains calculations again and put them into the relevant Self Assessment tax return.
If you don't NORMALLY submit Self Assessment tax returns, then you MAY not need to sign up to do one after you have already submitted the real time (i.e part way through a current tax year) submission. However, the calculation of a Capital Gains Tax amount is dependent on a person's other income in the tax year in which the gain occured. It is not a stand alone calculation.
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out. Many people do not know what their total income is until after the tax year has ended. And that includes people who are mainly taxed under PAYE - because they may not end up receiving in a given tax year the Gross Salary amount that they were expecting at the time the CGT calculations were being made. This is made even worse if they have other income that may complicate matters - like some interest or dividends.
After the end of the tax year, at the very least, a person should review the CGT amounts they calculated earlier in the year to see if they need to notify HMRC that they overpaid or underpaid the CGT when making the real time submission.
If you don't NORMALLY submit Self Assessment tax returns, then you MAY not need to sign up to do one after you have already submitted the real time (i.e part way through a current tax year) submission. However, the calculation of a Capital Gains Tax amount is dependent on a person's other income in the tax year in which the gain occured. It is not a stand alone calculation.
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out. Many people do not know what their total income is until after the tax year has ended. And that includes people who are mainly taxed under PAYE - because they may not end up receiving in a given tax year the Gross Salary amount that they were expecting at the time the CGT calculations were being made. This is made even worse if they have other income that may complicate matters - like some interest or dividends.
After the end of the tax year, at the very least, a person should review the CGT amounts they calculated earlier in the year to see if they need to notify HMRC that they overpaid or underpaid the CGT when making the real time submission.
Eric Mc said:
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out.
All very true. However, if someone knows their income will exceed £50,271 then I think they're dead centre for 20% flat rate CGT (after the tiny £3k annual exemption) and can pay the tax with certainty at any time they like. Even if you use the optional report and pay service (not to be confused with the compulsory, residential property side of things) you still have to report it again in your self assessment if you're within the self assessment system.
So, you can't change the tax rate by changing the reporting date but you can pay the tax early if you want to avoid the risk of spending the cash. This everyday point trips people up time and time gain.
HMRC: "Where's our money?"
Punter: "Oh dear, I've spent it."
Eric Mc said:
If you already complete Self Assessment tax returns, then you MUST redo the Capital Gains calculations again and put them into the relevant Self Assessment tax return.
If you don't NORMALLY submit Self Assessment tax returns, then you MAY not need to sign up to do one after you have already submitted the real time (i.e part way through a current tax year) submission. However, the calculation of a Capital Gains Tax amount is dependent on a person's other income in the tax year in which the gain occured. It is not a stand alone calculation.
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out. Many people do not know what their total income is until after the tax year has ended. And that includes people who are mainly taxed under PAYE - because they may not end up receiving in a given tax year the Gross Salary amount that they were expecting at the time the CGT calculations were being made. This is made even worse if they have other income that may complicate matters - like some interest or dividends.
After the end of the tax year, at the very least, a person should review the CGT amounts they calculated earlier in the year to see if they need to notify HMRC that they overpaid or underpaid the CGT when making the real time submission.
What's meant by the real time bit of the report and pay service? Does that mean it has to be reported and paid at the time of the transaction that's generated it? I'm sure the 'real time' description has been recently added, as when I looked 9 months ago I don't remember it saying that. I was under the impression at that time that I could use report and pay method any time before the 31st Jan 2025? If you don't NORMALLY submit Self Assessment tax returns, then you MAY not need to sign up to do one after you have already submitted the real time (i.e part way through a current tax year) submission. However, the calculation of a Capital Gains Tax amount is dependent on a person's other income in the tax year in which the gain occured. It is not a stand alone calculation.
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out. Many people do not know what their total income is until after the tax year has ended. And that includes people who are mainly taxed under PAYE - because they may not end up receiving in a given tax year the Gross Salary amount that they were expecting at the time the CGT calculations were being made. This is made even worse if they have other income that may complicate matters - like some interest or dividends.
After the end of the tax year, at the very least, a person should review the CGT amounts they calculated earlier in the year to see if they need to notify HMRC that they overpaid or underpaid the CGT when making the real time submission.
mjb1 said:
What's meant by the real time bit of the report and pay service? Does that mean it has to be reported and paid at the time of the transaction that's generated it? I'm sure the 'real time' description has been recently added, as when I looked 9 months ago I don't remember it saying that. I was under the impression at that time that I could use report and pay method any time before the 31st Jan 2025?
I don’t see any reason why you couldn’t go off the date range in the linked page.Panamax said:
Eric Mc said:
In other words, you cannot be sure if your Capital Gains Tax calculation is correct when you don't really know what your full income from all other sources is at the time the CGT calculations were carried out.
All very true. However, if someone knows their income will exceed £50,271 then I think they're dead centre for 20% flat rate CGT (after the tiny £3k annual exemption) and can pay the tax with certainty at any time they like. Even if you use the optional report and pay service (not to be confused with the compulsory, residential property side of things) you still have to report it again in your self assessment if you're within the self assessment system.
So, you can't change the tax rate by changing the reporting date but you can pay the tax early if you want to avoid the risk of spending the cash. This everyday point trips people up time and time gain.
HMRC: "Where's our money?"
Punter: "Oh dear, I've spent it."
Self Assessment was promoted by the Inland Revenue (as was) to be a great "simplification" of the tax reporting and payment system as it unified almost everything into one single "one stop shop" tax return.
I wonder why they are so keen to smash what had become a relatively strauightforward system that, after 30 odd years, we had all got used to.
It's like they've forgotten how messy things once were.
Thanks for the replies.
To be clear it's disposal of shares in June 24.
Rather than risk Cgt being aligned to income tax of 40% in the future after say, the next budget, can I put them into my tax return for y/e Mar 24 and pay the tax now. I'm assuming not, but just asking those who'd know for sure.
To be clear it's disposal of shares in June 24.
Rather than risk Cgt being aligned to income tax of 40% in the future after say, the next budget, can I put them into my tax return for y/e Mar 24 and pay the tax now. I'm assuming not, but just asking those who'd know for sure.
Mr Squarekins said:
Thanks for the replies.
To be clear it's disposal of shares in June 24.
Rather than risk Cgt being aligned to income tax of 40% in the future after say, the next budget, can I put them into my tax return for y/e Mar 24 and pay the tax now. I'm assuming not, but just asking those who'd know for sure.
It's irrelevant what will happen in the future, as you have disposed of the shares. The rate of CGT cannot be changed retrospectively so you will pay the rates in force now.To be clear it's disposal of shares in June 24.
Rather than risk Cgt being aligned to income tax of 40% in the future after say, the next budget, can I put them into my tax return for y/e Mar 24 and pay the tax now. I'm assuming not, but just asking those who'd know for sure.
Mr Squarekins said:
Thanks for the replies.
To be clear it's disposal of shares in June 24.
Therefore, you will need to complete a Self Assessment tax return for tax year 2024/25 and complete the Capital Gains Tax pages disclosing the details of the disposal and gain.To be clear it's disposal of shares in June 24.
As the disoposal occured in June 2024, 2024/25 tax rules and tax rates will apply.
The rates and rules for tax year 2024/25 were set in the last Conservative Budget so it is highly unlikely there will be any changes affecting tax rates etc for 2024/25. When the Labour Budget is finally presented, most if not all of the changes will come into effect for tax year 2025/26.
Eric Mc said:
When the Labour Budget is finally presented, most if not all of the changes will come into effect for tax year 2025/26.
Agreed. I would nonetheless alert people to a specific risk in connection with capital taxes, namely the possible introduction of a tax on lifetime gifts. The administration of such a tax is not dependant upon the usual "financial years" and it's very easy for the Chancellor to stand up and say, for instance, "....from midnight tonight there will be a 20% tax on lifetime gifts that exceed the existing IHT allowances of £3,000 p.a. and/or £250 small gifts".Until now, IHT has essentially been a "voluntary tax" and this is the only way to close the net.
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