Enter capital gains for MTD for Income Tax

This article explains what capital gains are and how to enter them for Making Tax Digital (MTD) for Income Tax in FreeAgent.

What are capital gains?

Capital gains are the profits you make when you sell or dispose of an asset for more than you paid for it.

You’ll usually pay Capital Gains Tax on the difference between the amount you sell an asset for and how much you originally bought it for, in other words the profit you made on the sale, not the total amount of money you received. Capital Gains Tax might be due on personal assets and on assets owned by the business.

Some assets are exempt from Capital Gains Tax. These include your main home, a personal car and most personal possessions that you sell for under £6,000, which come under the chattels exemption.

Everyone gets an annual exemption to use against any taxable gains up to a certain amount. From the 2024/25 tax year onwards, the exemption is £3,000 for individuals and £1,500 for most trustees. This means that you’d only usually have to pay Capital Gains Tax on gains above £3,000. For example, if you make a gain of £2,000 on selling a painting and have no other gains in the tax year, you’d have nothing to pay because £2,000 is below the annual exemption.

How to enter capital gains in FreeAgent

For MTD for Income Tax, capital gains can be entered on the individual information page.

Navigate to the ‘Taxes’ tab at the top of the screen and select ‘Income Tax’ from the drop-down menu.

Select the relevant tax year from the list.

Select the ‘Individual information’ tab.

Please see below for details on how to enter capital gains on residential property disposals or other capital gains and disposals.

Capital gains on residential property disposals

If you sold a property in the UK, you must report and pay any Capital Gains Tax due on UK residential property within 60 days of completing the sale of the property. You’ll need to sign in to your HMRC account to report and pay online.

To include the information in your FreeAgent account, select ‘Yes’ under ‘Do you want to report any capital gains and residential property disposals?’ and request your data or send an update.

To record a non-payment disposal, select the ‘Add residential non-payment property disposals’ button and enter the required information.

If you’re not sure what information you need to enter, please speak to your accountant.

Other capital gains and disposals

If you have other gains to report, you can do so in the tax year after you sold or disposed of an asset. If you’re eligible, you may be able to use the ‘real time’ Capital Gains Tax service to report by 31st December in the tax year after the sale.

To record any other capital gains and disposals in FreeAgent, select ‘Yes’ under the ‘Other Capital Gains And Disposals’ section and use the ‘Add X’ button to enter the relevant information. You can add gains and disposals for:

• Cryptoasset disposals
• Other gains disposals
• Unlisted shares disposals
• Gain on excluded indexed securities
• Qualifying asset holding company
• Non-standard gains
• Losses
• Adjustments
• Lifetime allowance

If you’re not sure what information you need to enter, please speak to your accountant.

Read more information from HMRC about Capital Gains Tax which might be useful when filling in your MTD for Income Tax return.