3 Credit: eamesBot/Shutterstock.com INVESTMENT here is no change to the CGT rate charged on property disposals, but those selling shares and other assets will now pay tax at 18% or 24%, depending on their marginal tax rate. Previously these stood at 10% and 20%. The previous Conservative government hacked back the CGT annual exempt amount (AEA) – the profits you can realise each tax year before CGT is applied – from £12,300 to just £3,000 over the last two years. The combination of these two measures means that many investors face significantly higher capital gains bills — but there are steps you can take to reduce this tax liability. ■ The first is to make the most of tax-efficient investment vehicles. Investors can deposit £20,000 annually into an individual savings account (ISA), and any gains made through this wrapper are sheltered from CGT. ■ Investors should also make strategic use of their CGT AEA. If you are looking to realise a large gain, it may be worth selling shares in tranches over two or more years to utilise each year’s CGT AEA, as it cannot be carried forward. ■ A strategy known as ‘bed and ISA’ takes advantage of the CGT AE every year. You sell investments to realise a capital gain, but then immediately buy back the holding within an ISA wrapper, moving unsheltered assets into a tax-free environment. Of course, you need to ensure your ISA allowance has not been allocated elsewhere. But don’t forget there will be stamp duty to pay if the asset being sold and repurchased is shares. ■ Investors can also deposit up to £60,000 a year into pensions which are not within the CGT regime and they also benefit from income tax relief on contributions. However, bear in mind that withdrawals can’t be made until the age of 55, soon to be 57, and withdrawals may be subject to income tax. Capital losses can offset capital gains, and losses can be carried forward indefinitely to offset future gains if reported to HMRC within four years of the end of the tax year in which the asset was disposed of. Married couples and civil partners have the option to transfer assets between each other to reduce the total tax paid as a couple. For example, where one spouse or partner stands to make a gain over £3,000, they can transfer assets to the other with no CGT implications. Both spouses can then sell their holdings and use both of their CGT AEAs. Owning assets jointly is also effective as any gain is split equally. As always, take advice before making key decisions about your finances. ✢ The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Past performance is not a reliable indicator of future performance. The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change. ISA investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers. Investors face higher tax on investment gains after the Chancellor Rachel Reeves raised the rate of capital gains tax (CGT) in her Autumn Budget. T Investment in a world of higher capital gains tax You can sell investments to realise a capital gain, but then immediately buy back the holding within an ISA wrapper, moving unsheltered assets into a tax-free environment.
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