Get ready for the Capital Gains Tax exemption cut

A cut to the CGT exemption, from April 2023, is expected to make CGT payments even busier than usual in the first few months of the year. Currently, investors can make profits of £12,300 a year before being subject to CGT. However, that annual exemption will reduce to £6,000 on 6 April 2023. From April 2024 onwards, there will be a further reduction to the exemption to £3,000.

Katharine says: “The 18% spike in CGT over the past year is a clear sign of the times. With scores of investors having exited the buy-to-let sector over the past year, and inflation causing house prices and asset values to soar, HMRC is reaping the rewards from people’s capital gains, collecting £18 billion in the past year alone – a rise of 102% in the last five years.

Year CGT
Feb 2022-Jan 2023 £18 billion
Feb 2021-Jan 2022 £15.2 billion
Feb 2020-Jan 2021 £10.8 billion
Feb 2019-Jan 2020 £9.6 billion
Feb 2018-Jan 2019 £8.9 billion

If you are considering selling a valuable asset, you may want to consider doing so by 5 April. Katharine comments that “tax should not dictate any big financial decisions, but if you are going to sell in a few months’ time anyway, then doing it now instead will mean you keep more of your gains.”

You can read Katharine’s comments in full in The Sunday Times (subscription needed) and Accountancy Age.

If you would like to find out more about how we can help you to plan for CGT, please contact Katharine Arthur or a member of the Private Client & Trusts team.

Capital Gains Tax (CGT) receipts on the rise: ePrivateclient

The rise in CGT receipts is according to the latest monthly tax figures released by HMRC. Between February 2022 and January 2023, the tax regulator collected a record £18 billion. In January 2023, CGT receipts were £13.2 billion, up 23% over January 2022 when compared like-for-like.

Katharine notes that “with scores of investors having exited the buy-to-let sector over the past year, and inflation causing house prices and asset values to soar, HMRC is reaping the rewards from people’s capital gains.” However, we have yet to see the full impact of the changes to CGT from the Autumn Statement in 2022. In addition, and in advance of the reduction to the CGT annual exemption rate in April 2023, the mood across investors is to streamline their portfolios in anticipation. This could lead to further increases in CGT receipts in January 2024.

Read Katharine’s comments in full in ePrivateclient’s article here (subscription needed).

Tax planning assistance

With the reduction in CGT annual exemption expected to raise an additional £25 million in tax revenue in 2023/24 alone, it makes planning in this area even more important. Our Private Client & Trusts team is on hand to help you make best use of the annual exemption and to plan your tax affairs. Please get in touch with Katharine or a member of the private client team to discuss your needs further. You can also reference our Year End Tax Planning Guide 2023 to help you make the tax rules work to your advantage ahead of the tax year-end.

Year End Tax Planning Guide 2023

This year, such a review may be even more beneficial than usual. Major changes to tax bands and allowances have been announced over the course of 2022. This means some last-chance opportunities to make use of allowances at current rates and to access current tax bands. Similarly, there may be areas where you have discretion over the timing of income and it is worth establishing whether income is better taken this year or next. Here again, a review before 5 April 2023 could have a significant effect on your tax position. For Scottish taxpayers, for whom higher and top tax rates are set to increase as well, there is even more to think about.

As your accountants, we have the all-round vision of your circumstances that can really help make an impact. To make the tax rules work to your advantage, it’s best to start the discussion as soon as possible before 5 April 2023. We look forward to being of assistance.

Download our Year End Tax Planning Guide below.

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • City of London Chamber launched
  • IR35 cases: a tale of two (fly) halves
  • Michael Lynagh v HMRC: caught offside
  • S & L Barnes Limited v HMRC: stayed onside
  • The best or worst of times?
  • False accounting to be a criminal offence
  • London still the top spot
  • R&D reliefs under attack
  • Are Organix and Nakd bars confectionery for VAT purposes?
  • And finally… tax return record

Click the button below to download this week’s edition, or read our previous editions here.

HMRC compliance activity greatly increasing

We have seen a huge increase in enquiries issued by HMRC since the turn of the New Year.

Enquiries by HMRC can be stressful, intrusive and long running. In addition, enquiry settlements can be costly and present financial challenges.

We strongly recommend seeking professional advice upon receipt of an enquiry notice. The right professional advisor can guide you through the process and ensure HMRC are acting within their legal boundaries. In addition, an experienced professional advisor will mitigate and suspend penalties where possible.

If you, your company, trust or charity receives an enquiry notice, then please contact Danielle Ford, head of Tax Disputes or Riocard Hoye, Senior Manager for a confidential initial discussion. Our team has a proven track record in successfully representing our clients in disputes with HMRC, resulting in the best possible outcome for them.

For more on HMRC’s recent enquiries and our analysis, read on below:

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