In their latest campaign, HMRC has identified individuals who may owe Capital Gains Tax (CGT) on the disposal of shares.
Taxpayers concerned have been contacted by HMRC by letter and have 60 days to respond. A response must be sent (by letter), even if the taxpayer is confident no CGT is due. Failure to inform HMRC of any additional tax that should be paid, or failure to settle outstanding tax, could result in penalties being charged in the future.
The key message of HMRC’s latest campaign is that taxpayers must pay CGT if their total chargeable gains from all disposals in a tax year are over the annual exempt amount.
CGT due on shares
There may be CGT to pay if a gain is made when shares or other investments are sold.
Shares and investments that may incur tax include
- Shares that are not in an ISA or PEP;
- Units in a unit trust; and
- Certain bonds (not including Premium Bonds and Qualifying Corporate Bonds)
Capital Gains Tax allowance rules
To determine if CGT is due, firstly the gain must be calculated – this is the difference between what was paid for the shares and what they were sold for.
CGT is due on the overall gain above the tax-free allowance – the Annual Exempt Amount (AEA), subject to the availability of capital losses arising in the same tax year or unused capital losses brought forward from earlier years, or other reliefs being available such as EIS deferral relief.
The AEA has reduced in recent years and taxpayers should be mindful of this to ensure they don’t overlook any CGT that may now be due.
The Capital Gains tax-free allowance for 2023-24 is
- £6,000; and
- £3,000 for trusts.
The Capital Gains tax-free allowance for 2024-25 will be permanently fixed at
- £3,000; and
- £1,500 for trusts.
Reduction in the Annual Exempt Amount
For the tax year 2022-23, the Annual Exempt Amount was £12,300 (£6,150 for trusts), this sizeable reduction is one that may catch taxpayers off guard and further enhance tax pressures.
HMRC estimates that by reducing the AEA, around 570,000 individuals and trusts could be affected by 2024-25 – with 260,000 brought into the scope of CGT for the first time.
The measure is expected to raise £1.6 billion by the end of the tax year.
How M+A Partners can help
The reduction in AEA will expose many more individuals and trusts to CGT.
Efficient tax planning may go some way to minimise the impact of this substantial tax-free allowance reduction. Professional advice will ensure the most appropriate tax solutions for your circumstances, enabling any eligible reliefs to be optimised.
If you are seeking tax planning advice, get in touch with our experts before the end of the 2023-24 tax year in order to maximise your exemption and mitigate any negative impacts on long-term gains. Contact one of our tax experts using the details below or email enquiries@mapartners.co.uk
