Capital gains tax (CGT) is levied on the profit created by selling various assets, most notably property. In simple terms, you only pay CGT on the difference between the purchase price and the sale price.
Gains up to £6,000 are currently tax-free, but the Government is cutting the allowance to £3,000 in April 2024. A clear understanding and strategic management of CGT is vital to optimise your financial outcomes.
Calling in the assistance of an accountant can be a wise move, but how might they charge for it?
Factors influencing accountant fees for capital gains tax
When seeking advice on CGT, the cost of an accountant’s services can be affected by multiple factors.
Here’s a closer look at what could influence the fees for CGT advice:
- The complexity of the transaction: CGT calculations can become complicated due to various reliefs and exemptions that may apply, such as Private Residence Relief, Entrepreneurs’ Relief (now known as Business Asset Disposal Relief), and others. The involvement of complex assets, cross-border elements, or the need to establish residency status for tax purposes can also complicate matters.
- Experience and expertise of the accountant: An accountant with substantial experience and qualifications in the realm of CGT might command higher fees. This is particularly the case for accountants handling CGT for businesses, which is typically more complex than for individuals.
- Scope of services: If you need a comprehensive service beyond calculating CGT – such as advice on tax planning, estate planning, and filing returns – the fees will likely be higher to reflect the broader scope of work.
How accountants can charge for CGT
Accountants may employ various pricing strategies to accommodate the varied needs of their clients.
Here’s an in-depth look at some common structures:
- Hourly rate: Often, accountants offer consultation services on an hourly basis. This pricing model is transparent and directly ties the cost to the amount of time an accountant spends on your CGT matters. For individuals with straightforward tax situations – such as a single property sale or shares disposal – this method can be cost-effective.
- Fixed fee: A fixed fee arrangement provides a clear, upfront cost for specific services. This is especially common for routine tasks such as calculating potential CGT liabilities or the preparation and submission of the CGT components within a self-assessment tax return. Clients benefit from the predictability of this model; they know the exact financial commitment from the outset, which aids in budget management. Fixed fees can be particularly advantageous when dealing with the more predictable aspects of CGT.
- Retainer: A retainer model suits individuals who expect frequent or continuous CGT advisory needs. This could apply to active investors, those managing large or diverse investment portfolios, or individuals planning significant financial changes such as business disposals or restructuring. A retainer involves a regular payment – usually monthly – and secures ongoing access to your accountant for CGT advice.
Tips for cost-effective guidance
To maximise the value you get from an accountant’s CGT advice while keeping costs in check, consider the following tips:
- Be prepared: Gather all relevant documentation and information before meeting with the accountant. This saves time and ensures the accountant has everything they need to provide accurate advice.
- Ask for a quote: Don’t hesitate to ask for a clear quote or estimate before engaging services. Understanding the cost upfront can prevent surprises later on.
- Discuss the pricing structure: Talk openly about the pricing structure and find the option that suits your needs best.
- Understand the value: Remember that while cost is an important factor, the value of expert advice can far exceed the fee, especially when it comes to minimising tax liabilities and ensuring compliance.
Understanding accountant fees for CGT advice is crucial for making informed decisions. The complexity of the transaction, the accountant’s expertise, and the scope of services all play roles in determining the cost.
Being prepared is vital to keeping costs down, as locating documents and transactions can be time-consuming.
Cottons offers tailored CGT advice for both individuals and businesses, helping you optimise your disposal of assets.