CGT opportunities

This is also an appropriate time of the year to consider your capital gains tax position if you have already disposed (or are considering a disposal) of an asset subject to CGT before 6 April 2018.

Most of our readers will be aware that they can make chargeable gains of up to £11,300 in the tax year 2017-18 and pay no CGT. This exemption cannot be transferred to a future tax year or carried back to a previous tax year if it is not utilised.

Many will also remember that it is no longer feasible to sell shares before 6 April 2018 to crystallise a CGT loss or a gain that is covered by the above exemption if those shares, or part of them, are reacquired within 30 days of the disposal – this sell and buy-back activity is often described as “bed and breakfasting”.

However, it is still possible to reacquire holdings, within the 30 days period, if you use an ISA or self-invested personal pension (SIPP) to make the buy-back.

Transfers of chargeable assets for CGT purposes are exempt between spouses and civil partners. Also, the annual exemption is available to both parties. This combination means that couples may be able to share the gain on a disposal of assets and reduce their overall CGT charge.

This strategy, of transferring partial ownership to a spouse, can also reduce an overall CGT charge if the transferring partner/spouse is due to pay CGT at the higher 20% or 28% rate (as their gains fall to be taxed in the higher rate tax band) and the receiving partner/spouse would only be liable to pay CGT at the lower 10% or 18% (as their share of a transferred gain would fall into their free basic rate band).

The 10% and 20% rates apply from April 2016, but do not apply to disposals of residential property or carried interest – for these latter items, disposals are taxed at 18% to 28%, dependent on where the gains sit in the basic or higher rates bands.

And don’t forget, CGT is assessed and payable as part of your self-assessment. Any tax payable for 2017-18 will be due for payment 31 January 2019. On the same day you will also have to pay any other underpayment of income tax for 2017-18 and your first payment on account for 2018-19.

If you own assets that are subject to CGT on disposal and you, and possibly your spouse, are struggling to fully utilise your CGT annual exemption, or you would like to discuss ways to minimise any CGT payable, please call to discuss your options.