The Autumn Statement - Capital Gains Tax

Hidden amongst the headlines of the Autumn Statement was the announcement by the Chancellor that the annual Capital Gains Tax (CGT) allowance will be slashed from £12,300 in the current tax year to £6,000 in 2023/24 and again to £3,000 in 2024/25.

What do these changes mean?

The changes mean that many disposals that would not previously have resulted in a CGT liability will, from the new tax year, give rise to a tax payment. It should be remembered that a ‘gift’ is considered a sale of an asset at market value, even where no money exchanges hands, so those who make gifts of assets - be it property or shares or other assets - will need to be mindful of the reduced annual allowance.

There are several ways to mitigate CGT, including:

• investing in an ISA
• making the most of the CGT exemption each tax year
• using any losses to reduce your gain. 

Those who are intending to make disposals that will result in annual gains of more than £6,000 after April 2023 should consider whether this course of action is still the best way forward. Our advice is to ask a qualified tax adviser on how best to mitigate your CGT bill. 

It was interesting to note that the Chancellor did not amend the CGT rate, which had been anticipated as a possibility, so any gains that exceed the annual CGT allowance will continue to be taxed at the existing rates of 20% for higher-rate taxpayers and 10% for basic-rate taxpayers, which equates to 28% and 18%, respectively, on gains from residential property that is not your main home.  

The Inheritance Tax nil rate threshold has been frozen for a further two years, which takes us to 2028, but the rate remains at 40%. Those who own large estates may want to consider disposing of some of their assets and paying CGT on the gain now rather than incurring a  40% IHT bill on those assets after they die, but of course this depends on individual circumstances. We will be pleased to discuss this with you in order to find the best course of action for you and your family.

Should you require any advice on Capital Gains Tax or estate planning in general, please contact us here at Birkett Long and we will be happy to help.