Capital Gain / need to do a tax return?

SW17

Have a friend who has just sold a house she inherited from her mother. The capital gain could be just under or just over the £11K threshold after sales costs (she's not 100% certain what the probate value was exactly, waiting for her to confirm). No other capital gains likely in this tax year, and she did not live in the property.

My questions are:

1. If the gain is under £11k, does she need to notify HMRC in any way about the sale of the property, and if so, by what means?

2. If the gain is over £11k, obviously she will need to declare and pay any CGT due, but is there any way for her to do this without completing a full tax return? It's very much a one-off situation.

The rest of her tax affairs are simple, she is retired with state pension / 2nd pension, plus a couple of company pensions from her late husband, basic rate taxpayer (AFAIK) and all savings are in ISAs or simple savings accounts. She's never had to do a tax return and the prospect would daunt her, even with help, so I'm hoping there is a way to avoid it.

Thanks for any help.

MrBeans

When you know the actual numbers you could ring the HMRC helpline and ask them. Have her earnings info to hand. She will need to be there when you phone to say it's OK for them to talk to you about her tax matters.

Filling in the simple self assessment form is actually very easy - not as scary as the idea. Print one off and go through it and you'll see only a few boxes would need to be filled in.

HMRC may say you can report the gain by writing a letter to them rather than filling in the self assessment form.

zygurat789

SW17 wrote: »

Have a friend who has just sold a house she inherited from her mother. The capital gain could be just under or just over the £11K threshold after sales costs (she's not 100% certain what the probate value was exactly, waiting for her to confirm). No other capital gains likely in this tax year, and she did not live in the property.

My questions are:

1. If the gain is under £11k, does she need to notify HMRC in any way about the sale of the property, and if so, by what means?

2. If the gain is over £11k, obviously she will need to declare and pay any CGT due, but is there any way for her to do this without completing a full tax return? It's very much a one-off situation.

The rest of her tax affairs are simple, she is retired with state pension / 2nd pension, plus a couple of company pensions from her late husband, basic rate taxpayer (AFAIK) and all savings are in ISAs or simple savings accounts. She's never had to do a tax return and the prospect would daunt her, even with help, so I'm hoping there is a way to avoid it.

Thanks for any help.

That's the bit which I would look at to make sure that there is only one PA been given and that the total income does not take her into 40% tax, this can and does happen even with simple tax affairs (your words)
I have seen it happen many times that peolpe who have no involvement in their working lives with HMRC fail to appreciate the implications of multiple income sources

purdyoaten

It should also be noted that any capital gain is reported on the 2014/15 return which cannot be completed until April with any capital gains tax not payable until January 2016

SW17

Thanks all. I have no problem helping her with a tax return as far as I can (am not an accountant, but have had to do my own annual tax return for many years...), though getting all the details from her will be an effort. She's not secretive, just never had to deal with finances when her husband was alive and finds it all confusing and stressful, documents filed all over the place etc etc.

On my question 1 above, if the capital gain is below £11k, does anyone know if HMRC have to be notified at all (assuming she is basic rate taxpayer on her income and has nothing else that would generate a tax return requirement)?

zygurat789

MrBeans wrote: »

When you know the actual numbers you could ring the HMRC helpline and ask them. Have her earnings info to hand. She will need to be there when you phone to say it's OK for them to talk to you about her tax matters.

Filling in the simple self assessment form is actually very easy - not as scary as the idea. Print one off and go through it and you'll see only a few boxes would need to be filled in.

HMRC may say you can report the gain by writing a letter to them rather than filling in the self assessment form.

The problem is that if there is a taxable gain in excess of £11,000 then HMRC will need a full disclosure of income to enable them to tax the gain at the correct rate(s).
Surely they wouldn't just accept a verbal statement that it's all at 20%?

MrBeans

zygurat789 wrote: »

The problem is that if there is a taxable gain in excess of £11,000 then HMRC will need a full disclosure of income to enable them to tax the gain at the correct rate(s).
Surely they wouldn't just accept a verbal statement that it's all at 20%?

Maybe, but if her income is way below the 40% threshold and the gain is only a few thousand, then they might agree that a simple letter saying my earning are x and the gain is y might suffice. But, as I said, once the numbers are to hand ring and ask them. Again, as I say above, even if they say a self assessment form must be completed, it really is easy to fill in if one's tax affairs are as simple as the OP's friend's seem to be.

MrBeans

SW17 wrote: »

On my question 1 above, if the capital gain is below £11k, does anyone know if HMRC have to be notified at all (assuming she is basic rate taxpayer on her income and has nothing else that would generate a tax return requirement)?

I think there is a rule that if the amount of the sale is above a certain amount you have to declare even if there is no taxable gain, but darned if I can find on the HMRC site if that rule is still in place.

Nick_C

Have a look at https://www.gov.uk/capital-gains-tax/overview and the subsequent pages.

When you get to

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay it suggests that you don't need to report a capital gain below the tax free allowance unless you are also claiming a loss.

Personally, I hate dealing with HMRC. If the capital gain is only slightly above the tax free allowance, I would consider reducing the selling price. Not very money saving, I know, but its a question of putting a value on the hassle of dealing with HMRC.

Nick_C

MrBeans wrote: »

I think there is a rule that if the amount of the sale is above a certain amount you have to declare even if there is no taxable gain, but darned if I can find on the HMRC site if that rule is still in place.

My reading of that - https://www.gov.uk/capital-gains-tax/work-out-need-to-pay - is that it only applies if you are also claiming a loss.

f your total gains are less than the tax-free allowance
You don’t have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

If they’re above this, you’ll need to report and pay Capital Gains Tax.

There are different rules for reporting a loss.

Sometimes you need to report to HMRC even if your gains are below the tax-free allowance. Send a tax return if:

you disposed of chargeable assets with an overall worth of more than 4 times the tax-free allowance - this works out as £43,600 for the 2013 to 2014 tax year
you have losses that you want to claim (if you’re not already registered for Self Assessment, you can write to HMRC instead)

gt94sss2

Nick_C wrote: »

My reading of that - https://www.gov.uk/capital-gains-tax/work-out-need-to-pay - is that it only applies if you are also claiming a loss.

I believe you have read it incorrectly.You need to tell HMRC if either or both of the two points below apply, so the relevant bit if there is no CGT payable would be the first bullet point below.

Sometimes you need to report to HMRC even if your gains are below the tax-free allowance. Send a tax return if:

• you disposed of chargeable assets with an overall worth of more than 4 times the tax-free allowance - this works out as £43,600 for the 2013 to 2014 tax year
• you have losses that you want to claim (if you’re not already registered for Self Assessment, you can write to HMRC instead)

Regards
Sunil