Enable’s IFAs in Bishops Stortford know that Capital Gains Tax is one of those tax allowances that can cause lots of anxiety and confusion. Capital Gains Tax (CGT) is charged on the profits made when certain assets are sold or transferred. You have to pay tax on the gains made above your annual tax-free CGT allowance, which this year is set at £12,000 (having increased from £11,700 last year). Unlike some allowances your annual exemption as this cannot be carried forward or back into other tax years so use it or lose it.
The rate of CGT depends on your existing tax bracket whether you are a Basic Rate or Higher Rate or Additional Rate taxpayer. For Higher Rate or Additional Rate taxpayers, this is simple: it’s 28% on your gains from residential property or 20% on your gains from other chargeable assets. For Basic Rate taxpayers, the situation is a little more complicated: you need to work out your annual income, minus the Personal tax Allowance (currently £12,500) and any other tax reliefs you receive. Then you need to take that figure and add your capital gains from the year. Then you reduce that number by the Capital Gains Tax allowance (currently £12,000). If the figure you come out with less than £50,000you’ll pay 10% tax on your gains or 18% on residential property. If the amount is above £50,000 you will be charged at 20% on gains and 28% for residential property.
CGT can be due on investments so it is wise to make sure you spread any capital gains over tax years. so for example, if you wanted to sell some shares it would make sense not to sell them all in one go but to maybe split your sales over two or more tax years. Enables IFAs can help with financial planning to manage your CGT.