CGT allowance – the first big cut

The CGT annual exempt amount has seen its first major reduction in years, falling from £12,300 to just £6,000 for the 2023/24 tax year. It will fall again to £3,000 in April 2024.

This reduction means that many more individuals will be brought into the CGT net when selling assets like shares, second homes, or business assets. Careful timing of disposals and the use of available reliefs will be essential for minimising the tax impact.

Who will be affected?

The change will affect anyone selling capital assets outside of a tax wrapper. Landlords selling rental properties, investors selling shares held outside an ISA, and individuals selling valuable personal possessions (such as antiques or cryptocurrency) will all feel the impact. Even modest gains that would previously have been covered by the allowance will now trigger a tax reporting requirement.

Timing your disposals

If you are planning to sell assets that will generate a significant gain, timing is crucial. If you can spread the disposal over multiple tax years, you can utilise the annual exempt amount for each year. However, with the allowance halving again next year, the benefit of delaying a sale may be limited, and you must weigh this against the risk of asset values changing.

Transferring assets to a spouse

Transfers of assets between married couples and civil partners are generally treated as taking place on a 'no gain, no loss' basis. This means you can transfer a share of an asset to your spouse before selling it, allowing you to utilise both of your annual exempt amounts against the final gain. This simple planning step can effectively double your tax-free allowance.