On 6 April 2024, the capital gains tax (CGT) annual exempt amount will be halved to just £3,000. What can you do ahead of this to save tax?
Tax by stealth
The annual exempt amount (AEA) is currently £6,000 per individual. It is available to most UK resident taxpayers (other than longer-term remittance basis claimants). This is less than half of the AEA for the 2022/23 tax year, when it was £12,300. For disposals made on or after 6 April 2024, the AEA is being halved to £3,000. This means additional capital gains tax of up to £840 per year for individual clients, or £1,680 for couples.
Pro advice
A caveat is that, due to the recent falls in inflation, there are rumours about tax cuts sooner than expected, so it’s possible the cut will be delayed or cancelled in the Spring Budget, but our view is that this is unlikely, and any cuts will probably focus on income tax.
Planning
An obvious strategy to avoid wasting the higher allowance is for you to realise gains before the cut, e.g. by selecting shares in a portfolio to just use the AEA.
Pro advice
This should be done as a matter of course for those with listed shares in any case, and you should check whether an investment manager has already done this.
However, not all of you have listed shares as investments. But there may be alternative investments that could be used instead. HMRC is currently focusing on investors in cryptoassets (see Follow up ). While this focus is on the 2022/23 tax year and return, it is an area that is under increasing scrutiny. It is certainly worth checking this. This can provide another opportunity to realise gains.
Pro advice
Exchanging one cryptoasset for another is considered a taxable event, so look in particular for transactions where no money (in the traditional sense) is received.
Accelerate
Another possibility is to try to accelerate gains that would otherwise fall into the 2024/25 year, i.e. gains that are already in the pipeline. This could be achieved by ensuring contracts are exchanged on or before 5 April 2024.
Ensure the CGT allowance is used up ahead of 5 April. If you have no listed shares, check whether you have cryptoassets that could be used to do this. Alternatively, accelerate any gains planned for later in the year.
Follow up
HMRC’s reminder to cryptoasset holders
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.