Navigating the Capital Gains Tax annual exemption reduction – a reminder of what you need to know

From 6 April 2024, the Capital Gains Tax (CGT) annual exemption will be reduced from £6,000 to £3,000. 

Due to this, more people will have to pay CGT which they might not have been liable to do before.  

The Office for Budget Responsibility has estimated that CGT will raise approximately £17.8 billion for the 2023 to 2024 tax year, further rising for the 2024 to 2025 tax year.  

What is CGT?  

CGT is a tax which is applied and charged if you sell, give away, exchange, transfer or dispose of an asset and make a profit.  

The profit (or gain) made on the asset is taxed, rather than the amount of money received for the asset.  

If you are in the basic income tax band (£12,571 to £50,270), you will pay 10 per cent on your regular gains and 18 per cent on any gains on a residential property above the annual exemption.   

Higher and additional rate taxpayers will pay 20 per cent on their gains and a further 28 per cent on residential property.  

You need to understand CGT and how you might be liable to pay it, which can be done through the advice of expert accountants.  

To calculate the gain made, you need to compare the sales proceeds with the original cost of the asset (or value when you acquired it).  

What does the CGT allowance reduction mean?  

Slashing the CGT annual exemption has resulted in large values of profits to be forced into the world of taxes.

Combined with the reduction of income tax thresholds, it now means a higher rate of CGT will be paid compared to previous years, for those who see their income pushed into higher tax brackets.  

If you are worried that you are liable to pay CGT, you might wish to consider timing the ‘disposal’ of your assets or alternative forms of ownership; you could do this by, for example, holding buy-to-let investments in a limited company structure.  

Due to CGT being paid at a much higher rate than before, the change will significantly affect landlords, second homeowners, and those looking to sell their property.  

A reduced CGT allowance is fast approaching, with its introduction date being just around the corner, so it is crucial you know what the reduction means for you and your tax obligations.  

If you would like more information and expert advice about your CGT allowance and tax obligations, contact us today.

Blog right caret

Adapting your business plan for the summer

Blog

Tax implications to consider for business owners when paying themselves 

Blog

Research and Development tax relief changes 

Blog

Business right caret

Small business confidence dips ahead of new customs controls coming into force

Four in 10 exporters have reported a fall in international sales since the end of the Brexit transition period, a major study has revealed. According to the tracker, four in 10 – around 41 per cent of traders – have reported a “drop off” in international sales in the three months to September 2021.

Business

Large number of businesses looking to recruit more staff

It is perhaps a sign of confidence returning to the UK economy that a significant number of British businesses believe they will be recruiting staff over the coming year.

Business

Spring Statement 2022 summary

Mr Sunak found himself addressing MPs against a background of crisis, with the residual impact of COVID, the invasion of Ukraine and the cost-of-living crisis all affecting the economy in different ways.

Business

Cloud right caret

Cloud-powered accounting: Advancing beyond traditional cloud accounting systems

Cloud

Cloud accounting isn’t right for my business! We disagree.

Cloud

Making MTD for ITSA easier for landlords

Cloud

Compliance right caret

HMRC asks sole traders to correctly report SEISS grants or “repay in full”

Sole traders who have not correctly reported their Self Employment Income Support Scheme (SEISS) grants may be forced to repay them in full, it has been warned.

Compliance

Making Tax Digital – what you need to know ahead of 2022-23

From April 2022 all VAT-registered businesses need to comply with MTD for VAT. MTD applies to taxpayers who file Income Tax Self Assessments for business or property income of more than £10,000

Compliance

Real-time online sanctions tracker to assist importers and exporters

Any business involved in international trade, whether importing, exporting or part of the supply chain supply to those firms, is faced with a rapidly changing regulatory environment.

Compliance

Economy right caret

Small businesses call for Government support to tackle climate change

According to new research, many are addressing energy usage, increasing recycling and investing in microgeneration, but only a third of those have a formal plan to tackle climate change within their business.

Economy

Hospitality bosses develop new strategies to cope with staff shortages

Hospitality business owners have responded positively to the staff shortages caused by the pandemic, by increasing wages and implementing improved staff retention strategies.

Economy

Everything you need to know about the new WTO Services Domestic Regulation

New World Trade Organisation (WTO) rules are set to cut the cost of global trade by billions of pounds every year, it has been announced.

Economy

Funding right caret

Funding for growing businesses – Obtaining and managing private investment

Funding

Investment right caret

Funding for growing businesses – Obtaining and managing private investment

Investment

MTD right caret

Making MTD for ITSA easier for landlords

MTD

SME right caret

Adapting your business plan for the summer

SME

Research and Development tax relief changes 

SME

Late payments – why they are so damaging to small businesses and how to deal with them

SME

Tax right caret

Understanding tax obligations for charities

Tax

Navigating estate planning and Inheritance Tax: what you need to know

Tax

Tax considerations for small business owners: Sole traders vs limited companies 

Tax

Tax Planning right caret

Almost 800,000 tax scams reported to HMRC in past 12 months, figures reveal

Nearly 800,000 tax-related scams were reported to HM Revenue & Customs (HMRC) in the past 12 months, a major study has revealed. According to the report, HMRC responded to 797,010 referrals of suspicious contact from the public in the last year. Around 358,000 of these involved scams where taxpayers were offered bogus tax rebates.

Tax Planning

Be aware of tax liabilities if you are using cryptocurrencies

For those who have dabbled in the market, its important for them to understand that there may be tax liabilities with Captial Gains Tax and Income Tax, with any transactions whether with currency or other crypto assets.

Tax Planning

Did you use a Bounce Back Loan to cover personal expenses during the pandemic? Act now to avoid tax consequences

If you received a Bounce Back Loan (BBL) during the coronavirus pandemic and took the cash as drawings, there may be additional tax consequences.

Tax Planning

VAT right caret

Paper VAT registration to be abolished in latest digital move

In the latest move in their Making Tax Digital (MTD) campaign, HM Revenue & Customs (HMRC) is removing paper VAT registration from 13 November 2023.

VAT

I’m not VAT registered; can I claim VAT back? 

VAT