The annual exemption for capital gain tax is about to decrease – by more than half!
Reducing the allowance from £12,300 to £6,000 is expected to impact 250,000 taxpayers during the 2023/24 tax year. It means that sales of assets for more than £6,000 profit will incur a capital gains tax liability.
The new exemption level of £6,000 is the lowest capital gains allowance since 1995/96. However, that isn’t the end of the matter. In April 2024, the exemption level will be reduced again – by another 50% – decreasing the 2024/25 allowance to just £3,000.
According to the Chartered Institute of Taxation (CIOT) the lowered allowances will see thousands more people required to fill out a self-assessment tax return, and possibly pay more tax as a result.
“This reduction is a blow to individuals and businesses as it is introduced alongside changes to dividend tax and the freezing of tax thresholds,” says Emily Bridges of re:accounts in Old Stevenage. “The biggest problem is that many people may not be aware they are affected until it’s too late.”
Examples of people affected by smaller gains incurring a tax liability are:
- people with small holdings of shares,
- non-UK residents selling investments in UK real estate, and
- those selling a second home, including foreign holiday homes.
Those unaware of the changes may incur tax bills and penalties. HMRC does not accept ignorance as an excuse for not submitting tax returns or paying tax when required.
John Barnett, chair of CIOT’s technical policy & oversight committee, said: “We urge the government to publicise these changes so that as many as possible of those who will be affected by the lowered allowance know their responsibilities and don’t end up with a surprise tax bill in the future.”
The measure is expected to raise £420m in 2024-25, rising to £855m by 2027-28.
Are you affected by the changes to the Capital Gains Tax threshold?
Are you planning to dispose of assets?
Contact the friendly experts at re:accounts. Saving tax is our superpower. Let’s talk.
