As a new tax year approaches, it is important to ensure you are in the best financial position to help protect and grow your future wealth.
Our Bitesize Tax Planning provides you with details of the key allowances and reliefs available to you. The tax planning tips are available in easy to consider sections.
This article looks at Capital Gains Tax.
Capital Gains Tax
Capital Gains Tax (CGT) is a form of taxation on profits earned from the sale of certain types of assets. Gains are calculated by subtracting the purchase price and related expenses (such as sales charges) from the selling price. They are generally taxed at a rate higher than income taxes in order to discourage speculation.
If you plan to sell assets that have appreciated in value, such as real estate, stocks or bonds, it is important to be aware of CGT and how it can affect your bottom line. Proper planning can help you minimise or even avoid CGT liabilities.
For years, the annual CGT exemption has been a useful way of reducing your liability for CGT on any profits you may make from investments or disposals of assets. But in the 2023/24 tax year, the capital gains tax allowance has significantly decreased by over 50%, from £12,300 to £6,000. This annual exempt amount is set to halve again to £3,000 in 2024/25.
This means that any individual who makes gains on assets over the value of £6,000 this tax year will be liable to pay capital gains tax on the excess amount at their marginal tax rate.
Married couples and civil partners each have a £6,000 exemption, with gains above this usually taxed at a rate depending on their income levels and the type of asset. Furthermore, if an asset is jointly owned with another individual, both parties can utilise their allowances, effectively doubling the exempt amount to £12,000 before capital gains tax becomes applicable.
More information on CGT can be found here: https://www.gov.uk/capital-gains-tax
If you would like to discuss anything mentioned in this article, please contact us.
Download our Tax Year End Checklist to assist with your tax planning below.
See the other topics in our Bitesize Tax Planning series:
Personal Reliefs
- Check Your Tax Code
- Personal Allowances
- Savings & Investments
- Dividend Allowance
Planning for Retirement
Research & Development Tax Reliefs
Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.
The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.
The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.
Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.
Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
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