What should you know about the CGT changes?

10 May 2024

With the 2024/25 financial year in full swing, it’s important to stay informed about the latest changes to Capital Gains Tax (CGT). The Annual Exempt Amount is now at a record low of £3,000, down from £6,000 last year. This has understandably sparked concerns for those considering selling high-value assets. But don’t worry—we’re here to explain everything clearly so you can be well-prepared.

Do you need to worry about CGT?

You should consider CGT if you plan to sell (‘dispose of’) an asset and expect to make a profit, meaning you sell it for more than what you paid. If you own personal possessions worth £3,000 or more, additional homes, shares, or business assets, CGT might apply. Planning the sale of these assets thoughtfully can help you maximise your Annual Exempt Amount.

Cryptocurrency

Cryptocurrency is another area where CGT may apply. Some crypto assets are subject to CGT, while regular income from trading or mining is taxed differently. The Chartered Institute of Taxation (CIOT) is concerned that many crypto investors may not be fully aware of the tax implications.

Starting in the 2024/25 financial year, Self-Assessment tax returns will include a section dedicated to crypto asset gains. However, with many people reporting CGT on these assets for the first time, confusion around liabilities is a real possibility.

How to plan for CGT

While CGT isn’t something you can avoid entirely, you can minimise its impact by timing your asset sales carefully. For instance, if you own two paintings worth £8,000 and £9,000 that you originally bought for £5,000 each, you could see gains of £3,000 and £4,000 respectively. If you sell both in one financial year, you’ll owe CGT on £4,000 at either 10% or 20% depending on your tax rate. But if you sell the second painting the following year, you’ll only owe tax on the £1,000 gain over the Annual Exempt Amount.

Business owners can also take advantage of Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief), which could reduce the CGT rate to 10% for those in higher and additional tax brackets.

For property owners

The Chancellor’s Spring Budget also lowered the CGT rate to 24% on the sale of second or additional homes for higher and additional-rate taxpayers. This change is designed to encourage the sale of these properties and boost the housing market. The good news is that Private Residence Relief remains unchanged, meaning that selling your main home is exempt from CGT if you only own one property and have lived in it for the entire ownership period.

If you have questions about how these changes affect you, reach out to our team, and we’ll gladly help!