UK & US Capital Gains Tax when disposing real estate property
December 24, 2018
Capital Gains Tax is the difference between the sales price of a real estate property and the purchase price. The difference is called capital gain. A real estate property gain is subject to either capital gains tax or income tax.
If you sell a real estate property in the United States (US), you will pay income tax on short-term capital gains. In terms of Capital Gains, according to the Inland Revenue Service (IRS), is an asset sold within one year. A long-term capital gain is an asset sold after one year. The capital Gains Tax rate is 15% when selling US-based real estate property.
Part of the gain when filing a 1040 tax return to the IRS is still subject to income tax when you sell a US-based real estate property investment. This is because you take a tax benefit of property depreciation to offset rental income on your 1040 tax return submitted to the IRS. The depreciation taken in previous years may be subject to income tax in the year of disposal.
A UK capital gains tax is subject to different tax rates depending on the type of asset sold. A basic rate taxpayer pays 10% on a capital gain that is not a residential property. Suppose a basic rate taxpayer despises of residential property, the CGT rate increases from 10% to 18%. A High-rate taxpayer pays 20% on a capital gain that is not a residential property. Suppose a High rate taxpayer despises a residential property the CGT rate increases from 20% to 28%. Each UK taxpayer benefits from a £12,300 capital gains tax exemption before they pay tax. This means that a couple could have a gain of £24,600 without paying capital gains tax on a disposal of an asset.
Assets sold in the UK must be reported to HMRC within 60-days of the disposal. Any adjustments to the capital gains tax liability will be calculated on the self-assessment tax return, which is submitted to the IRS after the 6th April in the year of disposal and the 31st January
It is essential to be tax efficient when it comes to property tax. It does not matter how you own buy-to-let properties, but you want to be tax efficient.
Optimise accountants and their property tax specialists have worked with thousands of UK landlords to deliver an excellent service to help reduce property tax
www.optimiseaccountants.co.uk
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