Capital Gains Tax

Capital Gains Tax (CGT) Annual Exemption

It is important to remember that you have an annual exemption for the tax year which is £3,000 for 2024/25.

This is a "use it or lose it" exemption, so it is not possible to carry it forwards.

Married couples & civil partners

Married couples and civil partners can transfer assets between themselves at no gain/no loss, so it can be possible to crystallise combined capital gains of £6,000 without being subject to tax.

Standard Rate 18%

Capital gains are taxed by reference to your total taxable income. Gains arising as from 30 October 2024 are taxed at 18% (previously 10%) to the extent that, when added to your taxable income, they do not exceed £37,700 for 2024/25.

Higher Rate 24%

Gains arising as from 30 October 2024 are taxed at 24% (previously 20%) to the extent that, when added to your taxable income, they exceed £37,700 for 2024/25.

Residential Property – different rates of tax

The standard and higher rates for gains on residential property are 18% and 24% respectively.

It is also important to note that tax on residential property gains is now payable within 60 days of completion of the sale, and a stand alone return detailing the disposal and liability is also required to be made within the same 60 days.

Business Asset Disposal Relief 10%

Gains qualifying for Business Asset Disposal Relief (previously Entrepreneurs' Relief), up to a lifetime limit of £1 million, are taxable at 10%.

The rate will increase from 10% to 14% for disposals made on or after 6 April 2025, and will increase again to 18% for disposals made on or after 6 April 2026.

Trusts

The annual exemption for 2024/25 is £1,500. Gains above this are taxed at 20% or 24% if in relation to residential property.

Investors’ Relief 10%

Investors’ Relief enables shareholders to benefit from a 10% rate of CGT up to a lifetime limit of £1m (previously £10m) for disposals made on or before 30 October 2024 . Investors' Relief is only available to investors in qualifying shares of an unlisted trading company (or the holding company of a trading group) for investors who are not employees involved in the running of the business.

As with Business Asset Disposal Relief, the rate will increase from 10% to 14% for disposals made on or after 6 April 2025, and will increase again to 18% for disposals made on or after 6 April 2026.

When you are considering transferring an asset to a spouse or civil partner it is important to note that, if that asset generates income, they will be taxable on that income from the date of transfer.

CGT is not the only consideration. Transacting in capital assets potentially has various other implications including both transaction costs and the impact that a disposal may have on the balance and overall risk profile of your investments.

Tax Tip | Use the exemption
The annual exemption cannot be carried forward or transferred, so aim to make disposals on or before 5 April each tax year in order to use that year’s exemption.

Tax Tip | Timing and use of the standard rate band
The timing of a disposal may affect the amount of CGT payable. For example, if you are a lower rate taxpayer in a tax year but expect to be a higher rate taxpayer in the next tax year, realising a disposal when you are a lower rate taxpayer may reduce the CGT payable.

Tax Tip | Losses
Capital losses must be offset against capital gains in the same year or carried forward to offset against future capital gains above the annual exemption. Careful timing of the disposals of assets which will realise losses can reduce future Capital Gains Tax liabilities. Where losses arise, a formal claim is required and must be submitted to H M Revenue & Customs within four years of the end of the tax year of the loss.

Tax Tip | Transfers
Capital assets that might be sold can potentially be transferred to, or split with, spouses or civil partners who can utilise their own annual exemption and standard rate band.

Do you understand the concept of the annual exemption for Capital Gains Tax?

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