Understanding the reduced Capital Gains Tax allowance.

by Paul Foster

As the curtains rise on a new tax year, there are some changes you should consider. One of the significant adjustments this year is the reduction in the Capital Gains Tax (CGT) allowance.

CGT is levied on the profit made from the sale or disposal of certain assets, such as property (excluding primary residences), stocks, and investments. The CGT allowance represents the threshold up to which individuals can realise gains tax-free within a tax year. Understanding this allowance is important when managing Non Pension & Non ISA investments.

The Capital Gains Tax allowance has been reduced from £6,000 to £3,000. Whilst the tax free allowance has been reduced, the tax rates remain broadly the same. These are highlighted below. 



Gain on disposal of chargeable assets  Gain on disposal of Residential Property
Basic Rate Tax Payer  10% 18%
Higher Rate Tax Payer  20% *24%

*The last budget reduced this figure from 28%

Implications and Considerations

  1. Increased Tax Liability ; With the reduced allowance, you may find yourself with higher tax liability on your capital gains. It is essential to assess the impact of this reduction on overall tax planning and budgeting.
  2. Strategic Asset Management ; The reduced CGT allowance underscores the importance of strategic asset management. We may need to reconsider the timing of your asset disposals and explore tax efficient investment strategies to mitigate the possibilities of higher tax liability.

Please make sure you use your ISA allowance each and every year.

Planning for the future 

In light of this we encourage you to take proactive steps to optimise your financial strategy. This means reviewing your Investment Portfolio and coming in to see us so we can make adjustments as needed. By staying informed about the changes in CGT regulations, understanding the implications for your financial circumstances, and seeking professional advice when needed, you can navigate the evolving tax landscape with confidence and optimise your financial outcomes in the new tax year ahead.