CGT reliefs much reduced from April 2023

The annual exempt amount applicable to Capital Gains Tax (CGT) is to be more than halved from April 2023. This means that the exempt amount will be reduced from £12,300 to £6,000 from April 2023 before being further reduced to £3,000 from April 2024.

Taxpayers with small gains should consider the benefits of crystalising these gains before 6 April 2023 in order to fully utilise the £12,300 allowance for 2022-23. Married couples and civil partners both qualify for the £12,300 allowance in which case organising joint ownership of these assets before disposal may be beneficial if each individual partner is not fully utilising their annual allowance.

Transfers between spouses and civil partners are exempt from CGT. Making use of the full allowance can, in some circumstances, effectively double the CGT exemption before the end of the current tax year to £24,600.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers pay basic rate tax on their income and make a small capital gain, they may be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers.