Capital Gains Tax (CGT) is a tax on the profit when you sell or dispose of an asset that has increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

As we approach 2024, individuals and businesses in the UK should understand the implications of CGT and explore ways to minimise its impact on their finances.

This article aims to provide you with practical strategies to reduce your CGT liability in 2024, alongside an overview of upcoming CGT rates for the year.

Understanding CGT rates for 2024

Before looking at reduction strategies, it’s important to understand the CGT rates for 2024.

CGT rates can vary depending on the type of asset and your income tax band. For the tax year 2024, the rates are as follows:

• 10 per cent (18 per cent for residential property) for your entire capital gain if your overall annual income is below £50,270.
• 20 per cent (28 per cent for residential property) for your entire capital gain if your overall annual income is above the £50,270 threshold.

Remember, these rates are subject to change based on Government announcements, so always check for the latest information.

Utilising tax-free allowances

One of the most straightforward ways to reduce your CGT is to make use of your annual tax-free allowance.

In 2024, every individual in the UK has a CGT allowance, meaning you can realise gains up to a certain amount without paying any CGT.

For 2024, the allowance will be £3,000 for individuals and £1,500 for most trustees.

If you have unused allowance in a given tax year, consider planning your asset disposals to maximise this benefit.

Timing your asset disposal

The timing of selling your assets can significantly impact your CGT.

If you expect to have a lower income in a future tax year, it may be beneficial to delay selling assets until then, potentially placing you in a lower tax bracket and reducing the CGT rate applied to your gains.

An experienced accountant will be able to recognise where the opportunities for this strategy lie.

Transferring assets to a spouse or civil partner

Transferring assets to your spouse or civil partner can be a useful way to reduce CGT.

Transfers between spouses or civil partners are usually CGT-free, and if your partner pays tax at a lower rate than you, any future gains may be taxed at a lower rate when they dispose of the asset.

Investing in an ISA or pension

Investing in an Individual Savings Account (ISA) or a pension can offer significant tax advantages.

While you can’t transfer existing shares into an ISA, selling shares and then repurchasing them within an ISA, known as ‘Bed and ISA’, can be a strategy to realise gains in a tax-efficient manner.

Similarly, contributing to a pension can reduce your taxable income and potentially bring you into a lower CGT rate band.

The yearly pension allowance for 2024 is set to be £60,000, but again, this could change depending on Government policies.

Offsetting losses against gains

If you’ve made a loss on some of your assets, you can offset these losses against any gains you’ve made, reducing your overall CGT liability.

It’s important to keep accurate records of any losses, as these can be carried forward to offset against future gains.

Claiming relief on business assets

Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) is a significant consideration for business owners looking to reduce their CGT liabilities.

The relief can reduce the CGT rate on qualifying business assets at the point of sale.

You should ensure you meet the criteria and consider this when planning the disposal of business assets.

Investing in Enterprise Investment Schemes (EIS)

Investing in EIS-eligible companies can offer CGT relief on your investments.

EIS is designed to help smaller, higher-risk companies raise finance by offering tax relief to investors.

Gains on EIS shares are free from CGT if held for a minimum period, usually three years.

Seeking professional advice

CGT is complex and often changes depending on Government policy so we may see a new set of challenges emerge after the general election next year.

Either way, it’s always advisable to seek professional advice tailored to your individual circumstances.

A qualified accountant or tax advisor can help you navigate the complexities of CGT and develop strategies that are most beneficial for your specific situation.

Remember, every financial decision should be made considering your overall tax position and long-term financial goals.

Please speak to a qualified accountant to get help with your CGT liabilities.