Capital Gains Tax window is almost closed

Time is running out as the Capital Gains Tax window is almost closed
Time is running out as the Capital Gains Tax window is almost closed

Time is running out for anyone who wants to make use of the current £12,300 Capital Gains Tax allowance before it plummets to £6,000 at the start of the new tax year this April and then to just £3,000 from April 2024.

CGT is a tax on the profit a person makes when they sell something a non-exempt asset – it is only the gain you make which is taxed, rather than the amount of money the person receives.

So for example, if you sold a second property or investments held outside an ISA or pension after 6 April, any profit above the £6,000 threshold would be taxed.

If you haven’t used your allowance from the 2022/23 tax year, but are considering selling anything that would be liable for CGT, you may wish to speak to your adviser for guidance as soon as possible.

That also means thinking ahead – would you have been likely to sell something during the course of 2023-24 for a known expense or for reinvestment? If you were, consider that from April 6 you will ‘lose’ another £6,300 of exempt allowance, which isn’t chicken feed!

If you have a General Investment Account (GIA) or private shares that would be hit by CGT when sold, it may be useful to sell these assets and place the proceeds in more tax efficient investments such as ISAs or pensions, even if you decided to re-purchase the exact same holdings.

Those affected could also include investors with taxable portfolios with large gains as they not have been keeping track of unrealised profits since purchase.

If it is still available to you, your £20,000 ISA allowance could stand you in good stead here, as could your £40,000 pension allowance.

So, if selling some assets had been part of your overall plan for retirement, to assist a family member or for any other expense, do not leave it too late.

It is also worth remembering the dividend tax allowance will be reduced over the next couple of tax years too, from £2,000 to £1,000 in 2023-24 and then £500 in 2024-25.

If you are with us and haven’t as yet spoken to us about this, please don’t hesitate to get in touch.

If you’re not with us but have concerns about your holdings and what this might mean for you, by all means please do contact us for a free and no-obligation initial consultation.