Last year, it was announced that major reductions in Capital Gains Tax (CGT) Allowance would be introduced in April 2023, with further reductions expected in April 2024.
CGT Allowance was reduced by over 50% last month, falling from £12,300 to £6000.
What is Capital Gains Tax?
CGT is a tax that is payable when you sell, exchange or dispose of an asset to make a profit. This could be a range of items, from investment properties to antiques and company shares.
CGT only applies when the item has increased in value, and is calculated on the difference between the original cost of the asset and its value when disposed of, sold or exchanged.
For example, if you bought artwork for £10,000 and sold it for £15,000, you would only be taxed on the £5000 profit.
Certain allowable expenses, however, can be deducted when calculating CGT, including legal and surveying fees.
What is CGT Allowance?
CGT Allowance is the maximum amount that you can earn in profit tax-free. Each tax year, the allowance resets and payment is only expected on yearly profits that exceed the tax-free amount.
As mentioned previously, the CGT has reduced significantly in a very short period of time and is set to drop by a further 50% to £3000 in April 2024.
Will I be affected?
The Government expects over 500,000 individuals and trusts to be affected by this year's changes, increasing to 570,000 in 2024.
There are currently no proposals to adjust these rates, meaning opportunities to mitigate tax liability have already begun to decrease.
Many businesses, trusts, galleries and property investors across the country are currently being forced to consider disposing of their assets to save money on taxes before the allowance drops further.
Can I get help?
If you are considering selling or gifting an asset soon, you should seek advice on the best and most cost-effective way around this.
Here at One Two One Accounts, we provide a comprehensive range of tax and accounting services, complete with the professional and personal service you deserve.
For more information or assistance in calculating potential CGT, get in touch with us today.