Capital Gains Tax Allowances and Rates
The decision to sell capital assets should first of all be driven by investment considerations rather than tax. As such we’d recommend a chat with a Menzies Wealth Management (MWM) Independent Financial Adviser.
Provided it makes investment sense, you may wish to consider the following points before the tax year end:
The first £11,700 of gains made in 2018/19 are generally CGT-free.
Each spouse has their own annual exemption, as indeed do children. As the annual exemption cannot be carried forward, it will be lost if not used.
Similar to the above, transferring assets to a lower earning spouse may create an opportunity to utilise their basic rate band so that CGT applies at 10% rather than up to 20%. (These rates are 18% and 28% for residential property).
A Bed & ISA will allow you to utilise the current years ISA Allowance by moving investments from an unwrapped environment to the ISA Tax Wrapper. This is achieved by disposing of the unwrapped investment and repurchasing it via an ISA. The disposal of the unwrapped investments may be liable to CGT but once inside the ISA, the investments are sheltered from CGT in the future.
You could also “straddle” a disposal across tax year end to make use of two annual exemptions. Alternatively, where you are planning on selling an asset, you may simply wish to consider delaying the disposal until after the end of the tax year. This may be helpful from a cash flow perspective as any tax arising will not be due until 31 January 2021.
Sale by one spouse and repurchase by the other (Bed & Spouse). This technique may also be used to establish a loss that can be set against any gains.
CGT on Main Residence
Taxation of gains made by non-residents
Tax Efficient Investments
Individual Savings Accounts (ISAs)
Enterprise Investment Scheme (EIS)
Seed EIS (SEIS)
Venture Capital Trust
Social Investment Relief (SITR)
Menzies Private Client Team
Personal tax planning can be complex; we would always recommend that you seek professional advice when undertaking a review to ensure all changes are processed and managed effectively. Please do speak with your Menzies contact who will be delighted to meet with you to discuss ideas, opportunities and the appropriate action.