Each year, individuals are entitled to a capital gains annual exemption.
Starting from 6 April 2023, individuals will face a significant reduction in the capital gains annual exemption. Currently set at £12,300 for the tax year, this allowance will more than halve to just £6,000. However, it doesn’t stop there, as it will be further reduced to a mere £3,000 from 6 April 2024.
It’s important to note that any gains exceeding the annual exemption will be subject to capital gains tax. For assets other than residential property, gains falling within the basic rate band will be taxed at 10%, while gains falling within the higher rate band will be taxed at 20%. When it comes to residential properties, the rates increase to 18% and 28% respectively.
One unfortunate aspect is that unused annual allowances cannot be carried forward to the next tax year. This means that if you don’t utilise the full exemption, it will be lost.
Considering the approaching end of the tax year, it would be prudent to make use of the current tax year’s annual exemption of £12,300. By taking advantage of this allowance, you can minimise your potential capital gains tax liability.
If you have any further inquiries or require assistance regarding this matter, please do not hesitate to get in touch with me.
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