Will I Have a Tax Bill After the Capital Gains Allowance Was Cut?

Category: Tax

Have you sold things like shares, rental property or valuable possessions and made a profit?

If you sell something for more than you paid, you may need to pay Capital Gains Tax on the profit. The amount of money you can make each year before paying this tax has been reduced a lot recently. This means more people are likely to owe taxes.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax you pay on any profits from selling certain valuable assets like:

  • Shares (not in a tax-free ISA or pension)
  • A property that isn’t your main home
  • Valuable personal belongings worth £6,000 or more (not including cars)

Isn’t there an amount of profit I can make without paying taxes?

Until April 2022, you could make up to £12,300 in profits each tax year before paying CGT. This tax-free allowance has been reduced to £6,000 for 2023/24, and it will drop again to just £3,000 from April 2024. As a result, more people could face a significant CGT bill if they sell assets for a profit above the £3,000 allowance. The tax rate on gains is either 10% (18% on gains from residential property) or 20% (24% on gains from residential property), depending on your total taxable income.

How Can a Financial Planner Help?

Facing an unexpected big tax bill is never nice. But there are some intelligent ways a financial planner may be able to reduce your potential Capital Gains Tax liability legally:

  • Timing asset sales across tax years to use your annual allowance
  • Transferring assets to a spouse/partner to use their allowance
  • Holding shares/funds in a tax-free ISA instead
  • Using a pension for tax-free long-term investing
  • Managing your overall taxable income level
  • Offsetting losses against gains

An expert can examine your financial situation and assets to create a tax-efficient plan tailored to you. They can help ensure you do not pay more CGT than necessary.

With reduced allowances, it’s more important than ever for investors and asset owners to get expert tax planning advice. To minimise your Capital Gains Tax liability, talk to a financial planner.

If you’d like to see how we can help, you can book a free, no-obligation chat here.

Get in touch

If you would like to learn more or book a no-obligation initial meeting, we would love to hear from you. Enter your details below and we will be in touch.

    Please read our Privacy Policy.