Adapting to the new Capital Gains Tax climate

A capital loss must be claimed within four years of the end of the tax year in which the loss arose. If you have any previous losses you should ensure you notify HMRC within the stated timescale. Claiming these losses could potentially be used to offset capital gains in the current, higher-rate Capital Gains Tax (CGT) UK environment.

Each individual has an annual Capital Gains Tax (CGT) allowance of £3,000, so couples can reduce their tax liability by fully utilising both allowances. Transferring assets between spouses does not give rise to either a gain or a loss, enabling the recipient spouse to sell the asset and apply their own CGT allowance.

This strategy is also useful if one spouse is a lower rate tax payer than the other, so that gains are taxed at the lower rate. By splitting gains between spouses, you can double the tax-free amount available, making it a valuable strategy to consider before any planned disposal. This approach requires careful coordination and alignment with each spouse’s overall financial strategy and tax profile.

Philanthropic investors might consider asset-based (in-specie) gifting, as gains on assets gifted to charity are not subject to Capital Gains Tax (CGT).

International Bonds remain CGT- and Income Tax- exempt on internal bond assets, making them more attractive under the new rates. In addition, generally, individuals do not pay CGT when cashing in their international bond.

Investors may consider deferring asset disposals, hoping for a future reduction in Capital Gains Tax (CGT) rates.

Unit Trusts and Open-Ended Investment Companies are not liable to Capital Gains Tax (CGT) within the fund. This means that individuals holding these investments have the ability to control if and when a personal CGT liability will arise by deciding when the holdings are disposed of – e.g. waiting until the following tax year to make effective use of that year’s CGT exemption (assuming there are no legislative changes which reduce or abolish the exemption).

However, they come with added costs and require alignment with investment goals. Some alternative investments, suitable only for sophisticated investors, also offer deferral opportunities through reinvesting gains.

For those using Family Investment Companies or Personal Investment Companies, the marginal difference between Corporation Tax (up to 25%) and Capital Gains Tax (CGT) (up to 24%) has narrowed. Still, these structures remain useful for succession planning and efficient income growth.

Every UK adult benefits from a £20,000 a year Individual Savings Account (ISA) Allowance.

Children under 18 also have a £9,000 a year Junior ISA Allowance.

Consider transferring assets into ISAs, utilising your allowance as well as any allowances that your partner/ children may have.