The simple answer to this is no! The companies do not pay capital gains tax on the gains they make instead they pay corporation tax .
Capital gains tax is more flexible than the corporation tax because there are reliefs available to self -employed and the sole proprietor, whereas if you are working through a limited company you will have to pay corporation tax at the flat rate. For the tax year 2022/ 2023 the corporation tax rate is 19% and you have to register for taxes as soon as you start the business. The corporation tax is set to increase from 19% to 25% in the year 2023.
The individuals doing a business as a sole proprietor or as partners get a tax free allowance of £12 300 when they sell a business asset ( which includes a residential property) any gains made over this amount will attract CGT. The rate at which CGT is paid depends on the income tax rate band you fall into because of the level of income you have and the type of asset that is being sold. It is 10% or 20% depending on the income and if you are selling a residential property it is 18% or 28% depending on which income tax rate band you fall into.
If you are in a property business and you are selling your buy to let property will you pay corporation tax or capital gains tax ?
Well again it depends on what business structure you have.
If you are self employed or in a partnership you will be paying capital gains tax on the sale of the property which is not your main home. However if you are running your property businesses as a limited company you will have to pay corporation tax on the gains. It is considered profit and will be taxed in the same way as the other profits of the company for example the trading profits or other investments.
Are the profits calculated differently for capital gains tax and corporation tax?
No, the chargeable gains will be calculated in the same way for both capital gains tax and corporation tax.
How do we calculate chargeable gains?
The chargeable gain is the difference between what you paid for an asset and what you sold the asset for .You can deduct other costs as well for example costs of improvement which will include any extensions which you did in your property. You can also deduct estate agent and any solicitor's fees.
Capital Gains Tax in high value residential property.
If you pay annual tax on enveloped dwellings you must pay capital gains tax when you sell the property upto 5th April 2019 or corporation tax upto 6 April 2019.
You will need to complete AETD related capital gains tax return if your company is a dwelling, is in the UK and was valued at more than £500 000.
If you want to save taxes you need to do planning ahead of the tax year you should consult a tax expert to be more aware of your taxes . We at Taxaccolega have expert accountants who can help you with your tax planning
If you are running a limited company or you are starting your new business and you want advice on taxes you can consult Taxaccolega and our accountants will be happy to help you.You can call us at 020 8127 0728 or send us a message here