Your annual Capital Gains Tax exemption is a valuable tax-saving opportunity that shouldn’t be overlooked.
It’s easy to believe Capital Gains Tax (CGT) is a tax that only the wealthiest investors pay but, in fact, HM Revenue and Customs raises more money from it than from Inheritance Tax – over £8 billion in the last tax year¹. If you sell any investments that were not held in a pension fund or an ISA, you could be liable for CGT on the profits you earned. The same goes for sales of buy-to-let property or, indeed, any property which is not your main residence. If you sell valuable belongings such as artworks, jewellery or furniture for £6,000 or more, those gains too might be liable to CGT.
Every individual can take the first £11,300 of any gains in the current tax year tax-free. If your spouse is not using their allowance, you can transfer assets to him or her – a procedure that is not treated as a sale and so is not subject to CGT. If you both then sell assets before the end of the year, you can effectively double the allowance to £22,600. This is a case of ‘use it or lose it’ – if you don’t use the allowance by 5 April, it doesn’t roll over and is lost forever.
¹ HMRC, November 2017
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
Please get in touch to find out more.