As we approach the end of the tax year it may be time to review your assets and consider utilising available tax allowances and potentially reduce future tax liabilities.
The current capital gains tax allowance is £12,300 for an individual (£6,150 for a trust). This is the amount of capital gains that can be realised tax-free in a tax year.
From 6 April 2023 the capital gains tax annual allowance will reduce to £6,000 (£3,000 for a trust) and is due to reduce again from 6 April 2024 to only £3,000 for individuals and £1,500 for a trust.
This phased reduction in the amount of tax-free gains that can be realised in a tax year means that many taxpayers who have historically used their CGT annual allowance each year via share dealing will find it increasingly problematic to extract funds from their portfolio in a tax efficient way.
If you have assets which have increased in value you may wish to consider whether to trigger a gain, by sale or transfer. Net gains realised of up to £12,300 will be free of Capital Gains Tax if realised before 5 April 2023.
If you have assets that have fallen in value, disposal of those will trigger a capital loss that can be used to offset any gains in the same year or be carried-forward indefinitely to reduce taxable gains in future.
How M+A Partners can help
We would recommend that you review your investments with your usual adviser and, if you have a significant capital disposal planned, that you take advice on the timing of the disposal and any tax mitigation options available.
Please speak to your usual contact at M+A Partners if you would like more information on how the reduction in the CGT annual allowance affects you.