A phased reduction in the capital gains tax (CGT) annual exemption is on the horizon. Currently £12,300, the exemption falls to £6,000 from6 April 2023. A further reduction takes effect from 6 April 2024, when it drops to £3,000. The move is expected to raise an additional £25 million in tax revenue in 2023/24 alone, and it makes planning in this area even more important.

A key component of any such planning is to make best use of the annual exemption. It is possible to transfer assets between you and your spouse on a no gain/no loss basis in order to make best use of the exemption. It is essential to get the detail of any transfer correct. Do please discuss any disposal with us first to make sure that it is effective for tax purposes.

CGT is charged at a lower rate of 10% (18% on residential property) for UK basic rate taxpayers and 20% (28% on residential property) for UK higher and additional rate taxpayers. Where one spouse is a higher rate taxpayer, and the other has not used their basic rate band in its entirety, transfer of assets thus has the potential to enable access to the 10% tax rate, rather than the 20% tax rate. Note that Scottish taxpayers pay CGT based on UK rates and bands and therefore need to assess their position based on UK rates.

Here to help

Please do not contact us to discuss any of the issues raised here.

For other year end tax planning opportunities including potential for director-shareholders, income tax rates and allowances, tax and family, savings and investments and Gift Aid, download our ‘Year End Tax Planning Guide’.

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