No one wants to pay more tax than they need to and, where possible, disposals should be timed to ensure that the best result is achieved from a tax perspective. Where a disposal is made around the end of the tax year, accelerating or delaying the disposal date can impact on the tax that is paid. This is particularly true this year, as the capital gains tax annual exempt amount falls from £6,000 for 2023/24 to £3,000 for 2024/25.
Don’t waste the exempt amount
Each individual has their own annual exempt amount for capital gains tax purposes. It is set against net gains for the tax year (chargeable gains less allowable losses for the year), but before using up any capital losses from previous tax years. The annual exempt amount is lost if it is not used in the tax year – it cannot be carried forward.
Spouses and civil partners are able to transfer assets between. This is useful from a tax planning perspective. If one spouse or civil partner has already used their annual exempt amount and wants to dispose of an asset that would trigger a capital gain, transferring the asset, or a share in it, to the other spouse or civil partner prior to disposal will enable the unused annual exempt amount to be set against the gain.
Timing considerations
When considering whether it is preferable to make a disposal in 2023/24 or wait until 2024/25, it is helpful to consider the following questions:
- Have I used up my annual exempt amount for 2023/24?
- Will I be a basic rate, higher or additional rate taxpayer in 2023/24?
- Have I realised any losses in 2023/24?
- Has my spouse/civil partner used their annual exempt amount for 2023/24?
- What rate does my spouse or civil partner pay tax at?
- Do I expect to realise gains and/or losses in 2024/25?
- What rate do I expect to pay tax at in 2024/25?
- What rate do I expect my spouse or civil partner to pay tax at in 2024/25?
For more information, Book a Free Consultation
The post Capital gains tax year-end planning appeared first on Makesworth Accountants.