Capital Gains Tax changes in the new tax year

It was not so very long ago that Capital Gains Tax – or CGT – was something most of us did not need to worry about.

But with more of us turning to investment rather than savings, CGT needs to be on our tax radar. What’s more, there are some major changes to the way it is charged in the new 2024/25 tax year.

At Continuum we are looking at what these changes are – and whether you may still be able to reduce the impact of CGT. 

How is Capital Gains Tax charged?

Capital Gains Tax is payable when you sell an asset that’s increased in value, with the exception of your home.

It is charged on the profit you make. So, if you bought an asset for £15,000 and sell it on for £25,000 you make a gain of £10,000, and you may need to pay tax on £10,000.

Currently, if you are a basic rate taxpayer, you pay 10% on most asset and 18% on residential property, unless the gain takes you above the basic tax rate.

But CGT is not charged to everyone at the same rate.

If you’re a higher or additional rate taxpayer (because your overall annual income is above £50,270) you’ll pay 20% on your gains from investments and most other assets. The exception is residential property, which has been set at 28%, and which will now be reduced.

Residential properties (that fall into the 18% for basic rate and 24% for higher rate taxpayers) must not be eligible for principal private residence relief, for example buy-to-lets.

For 2024/25, the higher rate of property capital gains tax will be reduced from 28% to 24%, Chancellor Jeremy Hunt announced in his budget of 6th March.

From 6th April 2024:

  • Basic Rate Taxpayers: Pay 18% CGT on residential property and 10% on other assets.
  • Higher Rate Taxpayers: Pay 24% CGT on residential property and 20% on other assets.

So what else is changing?

The threshold for CGT is the Annual Exempt Amount (AEA). For the tax year 2023/24, the AEA stood at £6,000 for individuals and personal representatives, and £3,000 for most trustees. However, starting from the 2024/25 tax year and subsequent years, the AEA will be permanently fixed at £3,000 for individuals and personal representatives, and £1,500 for most trustees.

Paying CGT

The 2024/25 tax year extends reporting requirements for certain transactions involving residential property. Taxpayers are now required to report and pay CGT within 60 days of the completion date for residential property disposals, including sales of rental properties and second homes.

Reporting your CGT liabilities will depend on whether or not you are in Self-Assessment for tax. If you are, you can use your Self-Assessment return to declare your CGT. If you are not, you may need using the government’s ‘real time’ Capital Gains Tax Service.

If you sell UK land and property, you may also need to report the disposal of the property to HMRC on a separate 60-day reporting form and pay CGT within 60 days of the date of completion.

To see what you owe, work out the gain for each asset (or your share of an asset if it’s jointly owned). Do this for the personal possessions, shares or investments, UK property or business assets you’ve disposed of in the tax year.

Add together the gains and deduct any allowable losses.

Getting some help

If you are an investor – and especially a first time investor – you need to understand the implications of Capital Gains Tax. 

To be fair, the government claims to be looking at improving the guidance it provides – but there is probably plenty of room for improvement. To be certain you know what your liability should be, and to make full use of any allowances, you need an expert on your side. 

At Continuum we can help you find your way through the CGT maze and help you see what you owe. But we won’t stop there. We can work with you to find the solutions which may help minimise your actual liability in the new tax year – for example by looking at losses you might have made in previous years.

Using our expertise may help cut your CGT bill in 2024/25 and make all your investing potentially more rewarding. Book a meeting with a Continuum expert today.

The information contained in this article is based Continuum’s understanding of HMRC taxation rates for tax year 2024/25 and does not constitute financial advice or a recommendation to suitable tax mitigation strategy. You should seek advice from a qualified tax professional regarding your own circumstances before embarking on any course of action.

The Financial Conduct Authority does not regulate taxation advice.

Levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.

The value and returns of an investment are not guaranteed, investors may lose some or all of their investment. Capital is at risk

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