As the end of the tax year approaches, it’s an important time to think about how you can make the most of your Capital Gains Tax (CGT) allowance. This year, the allowance is reduced to £3,000, half of last year’s exemption. However, changes to CGT rates following the Autumn Budget offer opportunities to optimise your tax position. Below are key points to consider, and if you’d like advice tailored to your specific situation, don’t hesitate to ask us, The Wealth Coach, for help.
1. How Much Allowance is Left?
If you’ve made disposals earlier in the year, check how much of the CGT allowance has been used up. You can choose which disposals to apply the allowance against, which is particularly important now that CGT rates will increase after October 2024.
2. Losses Can Help
Any capital losses can offset your gains for the year. It’s worth considering whether to carry forward losses from previous years or use them against this year’s gains. If you’re facing substantial gains, using losses wisely can help preserve your allowance.
3. Share Matching Rules
If you repurchase the same shares within 30 days of selling them, the gain is recalculated based on the repurchase price. To avoid this, consider repurchasing shares through your ISA or SIPP, where these rules don’t apply.
4. Transferring Assets to Spouse or Civil Partner
By transferring assets to your spouse or civil partner, you may effectively double the CGT exemption to £6,000. This is a useful strategy to consider if your partner has not yet used their annual allowance.
5. Inherited Shares
When inheriting shares, their value is reset to the market price at the date of death, potentially reducing your CGT exposure. Understanding how this works can help minimise any unnecessary tax liabilities.
6. Equalisation Payments
If you’ve made new investments just before distribution dates, equalisation payments will affect your cost base. This could slightly increase the gain you realise on disposal, so it’s important to track these payments correctly.
7. Pension Contributions
Making a pension contribution could extend your basic rate band, potentially reducing the CGT you pay on gains by lowering the taxable amount. This is especially beneficial for those with larger gains.
8. Reporting Gains
Make sure you report your gains correctly, as there are new reporting limits for self-assessment. Gains above the allowance will need to be declared, so it’s important to stay on top of any changes.
If you need personalised advice on managing your capital gains, The Wealth Coach is here to help you optimise your tax planning before the year ends.