What is the Capital Gains Tax (CGT) Allowance?
Capital Gains Tax (CGT) is a tax you pay on the profit you make from selling or disposing of certain assets, such as property, shares, or valuable personal possessions. Fortunately, individuals have an annual CGT allowance, which allows you to earn a certain amount of profit from asset sales before any tax is due.
CGT Allowance for 2023/2024
For the 2023/2024 tax year, the Capital Gains Tax allowance for individuals is £6,000. This means that if your total capital gains in a given tax year are less than or equal to £6,000, you will not have to pay any CGT.
CGT Allowance for 2024/2025
The Capital Gains Tax allowance for individuals is £3,000 now . This means that if your total capital gains in a given tax year are less than or equal to £3,000, you will not have to pay any CGT.
However, if your total gains exceed the £6,000 allowance, you will need to pay tax on the amount over this threshold. The rate of CGT you pay depends on your total taxable income and the type of assets you’ve sold. Generally, basic-rate taxpayers pay 10% CGT on gains, while higher and additional-rate taxpayers pay 20%. For gains on residential property, the rates are higher—18% for basic-rate taxpayers and 28% for higher-rate taxpayers.
How to Use the CGT Allowance
Your CGT allowance resets at the start of each tax year (April 6), so if you have assets to sell, it’s worth planning your sales over multiple tax years to make full use of your allowance. By doing this, you can potentially avoid paying CGT altogether or at least reduce your tax liability.
Key Points:
- The CGT allowance for 2024/2025 is £3,000 for individuals.
- Gains above this threshold may be taxed at rates ranging from 10% to 28%, depending on your total income and the type of asset sold.
- The CGT allowance is annual and resets each tax year, making it important to plan disposals accordingly to minimise tax.
If you think your capital gains will exceed the allowance, Merranti Accounting can help you understand your CGT obligations and plan tax-efficient strategies for asset sales. Contact us today for expert advice.
