Capital Gains Tax (CGT) is a tax paid on any gains made when an asset is sold, for example, a second home or shares. The annual CGT exemption allows for a certain value of gains to be made before any tax is payable with the current exemption being £12,300.00. However, as of April 2023, the annual exemption for CGT is to be reduced from £12,300.00 to £6,000.00 before then being further reduced in April 2024 to £3,000.00
The changes to the CGT annual exemption thresholds due in April 2023 and subsequently April 2024 will not, however, alter the CGT rates. These will remain at 28 per cent on gains from residential property and 20 per cent on gains from other assets for higher-rate or additional-rate taxpayers. The rates for basic-rate taxpayers will remain at 18 per cent on residential property and 10 per cent on other assets.
The rules regarding the timing of disposal of assets, as defined in Section 28 of the Taxation of Chargeable Gains Act 1992, also remain the same. The date of disposal for unconditional contracts is deemed as when the contract completes i.e. exchanges rather than the completion date. If a contract is conditional on a specific event occurring, then disposal will be treated as having taken place once the condition has been satisfied. Where the disposal is in the form of a gift the date of disposal will be based on when beneficial ownership of the asset passes.
Considering the changes to the annual exemption thresholds now would be the perfect time for investors to review their portfolios and decide whether assets should be disposed of or transferred. We do, however, advise that it would be best to seek the expert advice of a qualified tax adviser when making such decisions. The conveyancing team at John Hodge Solicitors will then happily assist with any sales of and/or transfers of property in order to take advantage of the current CGT allowance. Please feel free to contact the team for a free, no obligation, initial telephone appointment.