Cut to CGT exempt amount imminent
It’s always a good idea to try to utilise your capital gains tax (CGT) annual exempt amount before the end of the tax year. However, the amount is being cut in less than two weeks; meaning it’s more important than ever to take advantage now. How might you do this?
The current annual exemption for CGT is £12,300. However, for disposals made on or after 6 April 2023 the exemption is being slashed to £6,000. Worse still, it will be a meagre £3,000 from April 2024. The annual exemption is a wasting allowance - if you don’t use it, you lose it, so once the amount decreases there will be no way to utilise any unused amount from this year. Thankfully, with certain assets it's possible to plan disposals for efficiency. Probably the easiest assets to use for such planning are listed shares.
Assuming you have no other gains or losses to take account of, the simplest form of planning would be to look at the value of your shares each year and compare them to the historic cost. If you have at least some shares standing at a gain, you can sell just enough to realise gains of up to £12,300. This gives you tax-free cash. You can double the efficiency of this strategy by gifting some shares to a spouse or civil partner prior to them being sold. If you have an investment manager, check whether they already do this for you before making any transactions.
If you choose to utilise this strategy, don’t purchase shares in the same company within 30 days of selling them, as an anti-avoidance rule will make the planning ineffective. If you want to reinvest the gains, either wait until after 30 days, or choose a different but similar company to invest in.
Related Topics
-
HMRC reminds employers about payrolling benefits deadlines
HMRC is reminding employers of key dates and preparations ahead of the transition to real-time payrolling of benefits in kind (BiKs). With an important voluntary registration deadline approaching, what do payroll teams need to know?
-
Why do frozen mileage rates affect VAT?
Your business pays a fixed mileage allowance to staff who use their private cars for business travel. The rates published by HMRC have been frozen since 2011 but is this relevant to determine how much input tax you can claim on the payments?
-
HMRC restarts direct recovery of tax debts from bank accounts
HMRC has resumed use of its Direct Recovery of Debts (DRD) powers, enabling it to recover unpaid tax directly from the bank accounts of businesses and individuals who have ignored repeated attempts to settle outstanding liabilities. What does this mean in practice for business owners and directors?