Capital gains tax (CGT) allowances to be reduced from April 2023
In the Chancellor’s Autumn Statement on 17 November 2022, he announced that Capital gains tax allowances will be reduced from April 2023 and then further reduced from April 2024.
Capital gains tax is payable when certain items are sold or disposed of. Alongside land and property, which includes second homes and investment properties, capital gains tax can also be due on the sale of Art, Antiques or shares (held outside of an ISA or PEP).
Capital Gains Tax is calculated on the difference between what an item was acquired for and its value when it is disposed of (this can, in many circumstances include when items are gifted).
Certain allowable expenses can be deducted when calculating the tax due, for example, where property is concerned, this may include legal and surveying fees.
What is the capital gains tax allowance?
Currently, the Annual Exemption Allowance (AEA) for capital Gains tax is £12,300. From April 2023 this will reduce to £6,000. This will reduce further to £3,000 from April 2024.
This is the tax free amount a person can receive annually where a capital gain arises before they have to pay capital gains tax.
Anyone considering selling or gifting an asset soon, should consider the timing of their disposal carefully and if required, seek advice as soon as possible.
*2024 Update: To see the most recent Capital Gains Tax allowances and other tax brackets, please head to our 2024 blog ‘Tax brackets 2024 – our guide to the 24/25 tax year tax rates’
Will you be affected by the changes to the capital gains tax allowances?
The Government estimates that in the tax year 2023 to 2024 circa 500,000 individuals and trusts could be affected by these changes, increasing to 570,000 in the following tax year.
By the 2024/25 tax year, the Government estimates that an additional 260,000 individuals and Trusts may be liable for capital gains tax, that otherwise would not have, had these changes not been implemented.
ISAs will remain unaffected and private residence relief (PRR) on main homes will remain.
Where capital gains tax is not payable, where a gain of at least £50,000 is made, there is still a requirement to report this to HMRC.
Contact Alexander & Co for assistance with Capital Gains Tax
Alexander & Co. provide a comprehensive range of tax and accounting services from our offices in London and Manchester.
If you require assistance with calculating potential capital gains or are looking for advice on minimising any gains, given the changes to the capital gains tax allowances – including advice on the timing of your disposals – please contact us at info@alexander.co.uk.
You can also use our contact service here or complete the form below and we will be in touch to explain how we can assist you.
