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Changes to annual exempt amount applicable to Capital Gains Tax (CGT)


INTRODUCTION


The annual exempt amount applicable to Capital Gains Tax (CGT) is to be more than halved from April 2023.


WHAT ARE THE CHANGES FROM APRIL 2023?


This means that the exempt amount will be reduced from £12,300 to £6,000 from April 2023.


WHAT ARE THE CHANGES FROM APRIL 2024?


The exempt amount will be reduced further to £3,000 from April 2024.


HOW CAN YOU PLAN FOR THE CHANGES?


Taxpayers with small gains should consider the benefits of crystallising these gains before 6 April 2023 in order to fully utilise the £12,300 allowance for 2022-23. Married couples and civil partners both qualify for the £12,300 allowance in which case organising joint ownership of these assets before disposal may be beneficial if each individual partner is not fully utilising their annual allowance.


Transfers between spouses and civil partners are exempt from CGT. Making use of the full allowance can, in some circumstances, effectively double the CGT exemption before the end of the current tax year to £24,600.


CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers pay basic rate tax on their income and make a small capital gain, they may be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.


A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers. If you make a disposal of UK land and property, you may also need to report the disposal of the property to HMRC on a separate return and pay CGT within 60 days of the date of completion.


HMRC:


For more information from HMRC on the reducing annual exemption please visit the link below:



This summary is published for the information of clients. It provides only an overview of the main points, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

 

BWBCA Limited

Dukes Court

Duke Street

Woking

Surrey

GU21 5BH

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