A capital gain refers to the profit that is made when you sell an asset that has increased in value. For example, if you bought a watch for £10,000 and sold it later for £20,000, you’ve made a gain of £10,000. Capital Gains Tax (CGT) is the tax you pay on the profit you make from selling the watch (£10,000).
You only have to pay CGT on the overall gains above your tax-free allowance. The Capital Gains Tax-free allowance for the 2023-2024 tax year is currently £6000 and £3000 for trusts.
Capital Gains Tax rates and allowances can change from fiscal year to fiscal year so it’s important to stay informed about these changes and how they may affect your financial situation.
Are Capital Gains Taxes going to change in 2024?
Yes, the rules regarding Capital Gains Tax can change at any time and the government has already made some changes for the 2024-2025 tax year. To stay informed and receive personalised advice tailored to your financial situation, it is recommended that you consult with a tax advisor. We have compiled a list of the most important changes that you should be aware of.
Here are some of the most recent CGT changes:
- The government has announced a reduction in the higher rate of Capital Gains Tax for gains from residential property. The rate will be reduced from 28% to 24% for gains that accrue on or after 6 April 2024
- The annual exemption allowance will be reduced to £3000 from April 2024
Here is what will remain the same:
- ISAs will remain unaffected and Private Residence Relief (PRR) on main homes will remain
- The lower CGT rate will remain at 18%
- Where CGT is not payable, where a gain of at least £50,000 is made, there is still a requirement to report this to HMRC
What are the exemptions for Capital Gains Tax?
You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above the annual exempt amount. There are also a few exemptions for Capital Gains Tax that you need to know.
These are:
- There’s no CGT on gifts between spouses and civil partners
- Your main residence is usually exempt from CGT
- Gains can be deferred by investing proceeds in EIS shares
- Gifts into certain trusts can be ‘heldover’
- Business owners may pay 10% CGT on the sale of their business by claiming entrepreneurs’ relief
Other exemptions include inheriting assets, personal possessions sold for £6,000 or less, certain government securities, and betting, lottery, or pools winnings.
For further information on any of the above, we recommend referring to the UK GOV capital gains and property income manuals.
Need help with tax planning?
Here at 360, we cover a wide range of tax services from tax planning, VAT, self-assessment and HMRC investigations to trusts.
We provide clear and timely tax planning advice to individuals and businesses. For more information call us on 01482 427360 or fill out an enquiry form online.
