As part of the cutbacks in the Autumn Statement last year, the government confirmed that each person’s Capital Gains Tax allowance is to be reduced from 6th April 2023.
What is Capital Gains Tax?
Capital Gains Tax may be payable when you sell or give away non-cash assets, based on the difference between the value when you received the asset and the sale price or market value when you hand it over, taking into account certain deductible costs and allowances. One of these is each person’s CGT allowance, which currently stands at £12,300 for this tax year (half for trustees).
When is Capital Gains Tax payable?
You pay CGT on the profit you make when you sell or dispose of any items of value that exceed £6,000, shares apart from those in an ISA or personal pension, business assets and a property that isn't your main residential property; this includes a property that has been rented out or used for business.
Capital Gains Tax Changes
The usual trend has been for the allowance to increase each tax year, but this has now been reversed. The allowance for individuals and personal representatives in 2023/24 will be £6,000 and, for 2024/25, a mere £3,000 (with £3,000 and £1,500 respectively for trustees). The aim, naturally, is to increase the government’s income and, with Capital Gains Tax charged at up to 28%, this measure will no doubt help to do just that.
If you want to see how much Capital Gains Tax you will pay, you can use the calculator here.
With all this lined up, what should you do?
The answer is to take stock of your situation and, if your plan is to make any potentially chargeable gains, try to do so this tax year. Of course, with less than a month to go until the change in allowance, time is ticking…