In the Autumn Statement, the Chancellor announced that the annual exempt amount applicable to Capital Gains Tax (CGT) is to be more than halved next year. This rate had previously been fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and certain trusts for disabled people.
The exempt amount will now be reduced to £6,000 from April 2023 before being further halved to £3,000 from April 2024.
Any taxpayers that are thinking about the disposal of assets should consider the benefits of crystalising gains before 6 April 2023 to fully utilise the £12,300 allowance for 2022-23.
Married couples and civil partners both qualify for the £12,300 allowance in which case organising joint ownership of these assets before disposal may be beneficial if each individual partner is not fully utilising their 2022-23 annual allowance.
Transfers between spouses and civil partners are exempt from CGT. Making use of the full allowance can, in some circumstances, effectively double the CGT exemption before the end of the current tax year to £24,600.
CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.
A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers.