We are all aware of the change in government in July 2024. We are now expecting our first budget under the new labour government on 30th October 2024. 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 is capital gains tax. I want to explain to you when this may be payable and what you maybe able to do to beat any increase.
The tax change to capital gains tax may take effect immediately and so there may not be much time to prepare and therefore planning now is essential.
Capital gains tax is usually payable when as asset is sold at a gain. There are some 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 capital gains tax and that is based on cumulative gains.
The current capital gains tax rates 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 2 years and of which you own more than 5%, the tax rate is 10% on the first £1m (this is a lifetime limit).
Capital gains tax is one of the taxes that is expected to be hit by HMRC in the next budget and some of the changes that may happen 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 do before the budget. A few things you may want to consider are:
- Do you own any stocks and shares that 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 and so 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 to 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: www.champconsultants.co.uk
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