With Capital Gains Tax (CGT) rates increasing and the annual exempt amount reduced to just £3,000, it’s not surprising that HMRC is collecting considerably more revenue from CGT.
Basic rate taxpayers are facing almost double the CGT rate for disposals, up from 10% in 2024 to 18% in 2025, while higher rate taxpayers will also see an increase from 20% to 24%.
It’s important to keep up to date with the changes, as this will be an unpleasant hike – especially for couples who plan for the lower income partner to make taxable gains to reduce CGT.
So, are you staying on top of CGT planning for asset disposals this year?
What counts as a disposal for CGT?
‘Chargeable assets’ that are liable for CGT upon disposal include most personal possessions worth more than £6,000, property that isn’t a main residence, main homes that are very big or used for business, non-ISA shares, business assets, and (potentially) crypto-assets.
There’s a common misconception that CGT is only due if you sell an asset. However, giving an asset away to anyone other than your spouse or civil partner is also considered a disposal.
Similarly, exchanging an asset for something else or receiving compensation for an asset (such as an insurance claim if it has been lost or damaged) count as disposals, as well.
However, if you don’t receive any proceeds from gifting an asset, you might not have the funds to pay the CGT bill for the disposal – which will be calculated based on the asset’s market value.
Even if you sell an asset for less than it’s worth, its market value will still be used to calculate CGT liability, so you wouldn’t avoid this tax by selling the asset at an undervaluation.
In the case of cryptocurrency, if it’s used to pay for goods or services or there’s a currency conversion – such as switching Bitcoin to Ethereum – then there may be a taxable gain.
How can you reduce a CGT bill?
While there is now less scope for tax planning for CGT, there are still a few opportunities to help reduce your taxable gains, which include the following options:
- Making use of the £3,000 exempt amount every year (because it can’t be carried forward)
- Making personal pension contributions in the same year to reduce the rate from 24% to 18%
- Crystalising assets that stand at a loss (reducing gains without wasting the exempt amount)
Additionally, spouses and civil partners should continue to plan for CGT as a couple, as they can utilise two exempt amounts and the basic rate if only one of them is a basic rate taxpayer.
More information on the rules, allowances, and rates can be found in HMRC’s online CGT guide.
Another option is to seek professional tax advice from a financial consultant. Here at gbac, we have a team of accountants in Barnsley who can help you optimise disposals to reduce CGT.
To find out more, call us on 01226 298 298 or send an email to info@gbac.co.uk today.