We are all aware of the change in government that took place in July 2024. We are now expecting our first budget under the new Labour government on 30 October. We have been told there will be tax changes, as there is a huge black hole that needs to be filled. One of the tax changes expected concerns the capital gains tax. I want to explain to you when this may be payable and what you may be able to do to beat any increase.
The change to capital gains tax may take effect immediately and so there may not be much time to prepare: therefore, planning now is essential.
Capital gains tax is usually payable when an asset is sold at a gain. There are exemptions to the rules, such as selling your main home, selling stocks and shares in an ISA and a few others.
The current capital gains tax annual allowance is £3,000. Therefore, you can make up to £3,000 in capital gains before having to pay any tax, and that is based on cumulative gains.
Capital gains tax rates at the moment are 10% for gains below the higher rate band and 20% for gains above the higher rate band. For sales of residential property, the rates are 18% for gains below the higher rate band and 24% for gains above the higher rate band.
On the sale of a business that has been trading for at least two years and of which you own more than 5%, the tax rate is 10% on the first £1m (this is a lifetime limit).
What could happen in the budget?
Some of the changes that HMRC may make to capital gains tax are:
- Removal of tax-free allowance of £3,000
- Increase in tax rates to be more in line with income tax
- Increase in tax rates but with a potential taper based on length of ownership
There are a few things that you may want to consider before the budget:
- Do you own any stocks and shares you want to sell and then perhaps buy them in an ISA to protect them from capital gains?
- Do you own any crypto that you want to sell and benefit from any growth?
There is little time to be able to sell assets of a larger value, however, quicker sale items may be worth considering.
It is difficult to speculate what may be in the next budget: this information is purely speculative and cannot be relied upon. There may be no changes to capital gains tax in the next budget, but I doubt this will be the case.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website.
Chantal Baker is the director and founder of Champ Consultants Ltd, an accountancy and tax consultancy practice in Caterham. Please follow them on the various social media channels.
You can also follow Chantal on TikTok.
