Some careful consideration can help minimise your capital gains bill this year.
Everyone has an annual CGT exempt amount, which in 2022/23 makes the first £12,300 of gains free of tax.
CGT is payable when you sell an asset, or gift it to a family member, and there has been an increase in the value of the asset.
Most gains above the exempt amount are taxed at 10%, with 20% payable on gains that exceed this limit. Residential property gains are taxed at 18% and 28%.
You should generally aim to use your annual exempt amount by making disposals before the end of each tax year. If you have already made gains of more than £12,300 in this tax year, you might be able to dispose of loss-making investments to create a tax loss. This could reduce the net gains to the exempt amount.
CGT planning points
- Transferring assets between married couples or civil partners before disposal might save CGT. Particularly where one partner has an unused exempt amount: has not fully used their basic rate tax band or has capital losses available. You should generally leave as much time as possible between the transfer and the disposal.
- CGT is normally payable on 31 January after the end of the tax year in which you make the disposal. You could delay a major sale until after 6 April 2023 to give yourself an extra 12 months before you must pay the tax. Note: a payment on account of CGT must be made within 30 days of a residential property disposal (other than of an exempt principal private residence). Therefore, no timing advantage to delaying such a disposal.
- Timing your disposals is particularly important if disposals in this tax year have resulted in a net loss. Depending on the level of your income, making a disposal either side of the tax year end could save or cost you tax.
- Shareholding or another chargeable asset might have lost virtually all value. If so, you can claim the loss against your capital gains without disposing of the asset by making a negligible value claim. You can backdate the loss relief to either of the two tax years before the one in which you make the claim – provided you owned the asset in the earlier year, and it was already of negligible value.