Capital Gains Tax
Capital Gains Tax (CGT) is a tax on the increase in value of your possessions - such as a second home; valuables including jewellery; antiques and art; or shares - during the time you have owned them. Any tax is due when you sell or give them away. You need to have made a certain amount of profit on your items before you can be taxed on them. It is the gain you make that is taxed, not the amount of money you receive.
The CGT allowance for the tax year 2023/24 is £6,000.
There are two different rates of CGT which vary depending on the asset you have made a profit on and your tax band:
- If you have made a capital gain on an investment that isn't a property, the CGT rate for basic-rate taxpayers is 10%, and for higher and additional rate taxpayers is 20%
- If you have made a capital gain on a second home or buy-to let investment, the CGT rate for basic-rate taxpayers is 18%, and for higher and additional rate taxpayers is 28%
CGT Reporting Extension
Since 6 April 2020, any UK resident disposing of a UK residential property who has CGT to pay, must pay their CGT within a short period of time following completion of the property sale. Initially the period was 30 days, but at the Autumn Budget 2021 this period was increased to 60 days for completion dates on or after 27 October 2021 - with the shorter deadline remaining in place for disposals which were completed before that date.
The Budget also confirmed that, for mixed-use properties disposed of by UK residents, only a portion of the gain that relates to the residential part of the property should be reported and paid to HMRC.
Business Asset Disposal Relief
Formerly known as Entrepreneurs' relief, Business Asset Disposal relief can be claimed for gains arising on disposals of businesses, shares in personal trading companies and associated business assets. Relief applies an effective rate of CGT at 10% when you dispose of any qualifying assets in 2023/24. There is no limit to the number of times you can claim the relief, while you can claim up to £1 million of business asset disposal relief in your lifetime.
How we can help
With careful planning and the right tax advice it is often possible for individuals and trusts to reduce, delay and sometimes totally avoid capital gains tax. Morris Crocker’s tax advisers will calculate your current exposure to capital gains tax and then discuss your options for restructuring your affairs which may include:
- Claiming all valid tax deductions
- Claiming all eligible reliefs
- Crystallising losses on other assets
- Becoming non-resident and non-domiciled
- Maximising the use of annual exemptions
- Use of trusts or pension funds
- Transferring ownership of assets
- Restructuring the asset held
- Careful Will planning
If you would like our advice on any of these matters, please call us on 023 9248 4356.