There are certain assets that you can sell without paying CGT.
They include:
- The sale of any chargeable asset, like shares or a second home, if the overall gains in the current tax year do not
exceed £6,000 (2022-23 – £12,300). - Any gains on assets you gift to your spouse, as long as you were not separated and didn’t live together during the tax year.
- Qualifying gifts to a charity.
- Gains from ISAs or PEPs.
- Gains on disposal of certain UK government gilts and Premium Bonds.
- Betting, lottery or pools winnings.
- In most instances, the disposal of your
main home. - The disposal of your own car unless you have used it for business purposes.
- Any personal possession (jewellery, paintings, antiques and other collectibles) unless sold for more than £6,000.
CGT rates for 2023-24 are:
If you pay income tax at higher rates on your income plus capital gains (40% or above) you will pay CGT at:
- 28% on gains from the sale of chargeable residential property, and
- 20% on gains from the sale of other property.
If you pay income tax at basic rates on income and gains (20%) you will pay CGT at:
- 18% on gains from the sale of chargeable residential property, and
- 10% on gains from the sale of other property.
To qualify for the lower rates your taxable income plus the chargeable gain must be within the basic rate income tax band. If the gain is part under and part over this limit you will pay CGT one part at the lower and part at the higher rates.
Work through the checklist that follows and if any apply to your circumstances call to discuss your options.
Capital Gains Tax (CGT) Planning Check List 2023-24
- Make sure you utilize your annual tax-free allowance of £6,000. Consider selling assets, shares for example, which can be sold within the tax-free allowance.
- The CGT tax-free allowance reduced to £6,000 from April 2023 and will be subject to a further reduction to £3,000 from April 2024. In which case taxpayers contemplating disposals of chargeable assets may be advised to crystalise gains before 6 April 2024 to ensure the higher tax-free allowance for 2023-24 is fully utilised. Planning disposals is key during this period to obtain the best tax result.
- If your chargeable gains are likely to exceed the £6,000 limit, are there any assets you can sell at a loss to reduce the total gains below the tax-free limit? It is no longer possible to sell and buy back shares to facilitate this planning option: the so-called “bed and breakfast” arrangement.
- If you are contemplating the sale of your business, make sure you have arranged your affairs such that you can claim Business Asset Disposal Relief. This will potentially allow you to make qualifying gains of up to £1m and only pay CGT at 10%.
- As the level of your taxable income, for income tax purposes, will affect the rate of CGT you will pay, investigating ways to reduce your income tax earnings may save you CGT as well as income tax.
- A gift of chargeable assets to your spouse does not create a CGT charge.
- Your spouse and children also qualify for a separate tax-free allowance of £6,000. Transferring assets between family members can reduce overall CGT liabilities if considered before a sale.
- It may be possible to claim other reliefs to reduce your potential liability to CGT. These could include rollover and hold-over gains reliefs. If you are likely to make significant capital gains during 2023-24, please contact us for advice as soon as possible so that we can explore available strategies for minimizing your CGT bill.
- Although the sale of your main home is generally free of CGT, if you have let the property at any time during your period of ownership, or if you have made significant use of the property for business purposes, then there may be a CGT liability when you sell. If you are affected, make sure you take advice on this issue.
- CGT payable on chargeable disposals after 5 April 2023 and before 6 April 2024 will be due for payment on 31st January 2025. If you delay the disposal until after 5 April 2024, any CGT due will be payable a year later, on 31st January 2026. Theoretically, you could delay disposal by one day (from 5th April to 6th April 2024) and this would extend the amount of time you would have to pay the tax by 12 months.
- The only exception to the above payment dates is if you are selling a residential property that is not covered by Private Residence Relief. For example, a personally owned let property or a holiday home. Gains on these property disposals have to be filed with HMRC – and any CGT paid – within 60 days of the property disposal (the completion date not the exchange of contracts date).
Review all the assets you own that are currently worth less than you paid for them. Should you dispose of them and make use of the capital losses? Which would be the best tax year to register the loss? This could include a claim to treat shares as having no value (a negligible value claim).
Please see this HMRC link: https://www.gov.uk/capital-gains-tax
If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.
To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/record-keeping-for-dividends/
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