Cut to CGT exempt amount imminent
It’s always a good idea to try to utilise your capital gains tax (CGT) annual exempt amount before the end of the tax year. However, the amount is being cut in less than two weeks; meaning it’s more important than ever to take advantage now. How might you do this?
-
Accounting for VAT if there is no cash payment
Your business has submitted repayment returns for the last two quarters and you are concerned that you might have underpaid output tax on some supplies where no money has changed hands. Are your concerns justified?
-
Treatment of distributions under review
The government has launched a consultation on modernising the tax treatment of distributions and repayments of capital by companies. The proposals could affect the distinction between dividends taxed as income and capital payments subject to CGT. What changes are being considered?
-
Tax relief on equipment you haven’t paid for (yet)
The timing of tax relief for purchases of equipment isn’t straightforward when payments are delayed or goods are purchased through hire purchase (HP) agreements. How can you use these rules to your advantage and get tax relief before you’ve paid the final invoice?
The current annual exemption for CGT is £12,300. However, for disposals made on or after 6 April 2023 the exemption is being slashed to £6,000. Worse still, it will be a meagre £3,000 from April 2024. The annual exemption is a wasting allowance - if you don’t use it, you lose it, so once the amount decreases there will be no way to utilise any unused amount from this year. Thankfully, with certain assets it's possible to plan disposals for efficiency. Probably the easiest assets to use for such planning are listed shares.
Assuming you have no other gains or losses to take account of, the simplest form of planning would be to look at the value of your shares each year and compare them to the historic cost. If you have at least some shares standing at a gain, you can sell just enough to realise gains of up to £12,300. This gives you tax-free cash. You can double the efficiency of this strategy by gifting some shares to a spouse or civil partner prior to them being sold. If you have an investment manager, check whether they already do this for you before making any transactions.
If you choose to utilise this strategy, don’t purchase shares in the same company within 30 days of selling them, as an anti-avoidance rule will make the planning ineffective. If you want to reinvest the gains, either wait until after 30 days, or choose a different but similar company to invest in.
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.