Capital Gains Tax Changes in the UK: What You Need to Know

As a UK resident, it is essential to stay informed about any changes in the tax laws, especially regarding Capital Gains Tax Changes in the UK. In recent times, the UK government has made several changes to CGT regulations, and it is crucial to understand how these changes could affect you.

What is Capital Gains Tax?

Before diving into the recent changes in Capital Gains Tax (CGT) regulations, let us establish what CGT is. CGT is a tax that you pay when you dispose of an asset that has increased in value. This can be a property, shares, or any other form of asset. The amount of tax you pay is calculated based on the difference between the price you bought the asset for and the price you sold it for.

Changes To Capital Gains Tax Allowance and Rates in Autumn Statement 2022

The Autumn Statement 2022 included several changes to dividend and capital gains tax allowances that UK taxpayers need to be aware of. The changes were aimed at making the tax system fairer and more efficient. But in summary the most significant changes to capital gains tax are as follows:

Capital Gains Tax Allowance

As part of the recent Autumn Statement, it has been confirmed that the tax-free allowance for capital gains tax will be reduced from £12,300 to £6,000 in April 2023.

It will then be reduced from £6,000 to £3,000 in April 2024.

Capital Gains Tax Rates

The rates of CGT remain unchanged in the Autumn Statement 2022. Basic rate taxpayers pay 10% on gains above their annual allowance, while higher and additional rate taxpayers pay 20%. For gains on residential property, basic rate taxpayers pay 18%, while higher and additional rate taxpayers pay 28%.

There is currently no proposed change to the tax rates.

Other Recent Significant Changes in Capital Gains Tax

Dividend Tax Allowance 2022

As of Autumn Statement 2022, the dividend tax allowance, which is the amount of dividend income that is tax-free has been announced that there will be allowance reduction to £1,000 from April 2023. This will then be further halved from April 2024 to £500 per annum.

Payment Window For Capital Gains Tax on Property April 2020 & October 2021

On 6 April 2020, if you sell a residential property in the UK, you must pay the CGT owed within 30 days of the completion date. This is a significant change from the previous rules, which allowed taxpayers to pay the tax in the next tax year. From October 2021 this has been further extended to 60 days.

Lettings Relief Abolishment April 2020

Lettings relief has been a valuable relief for landlords in the past. However, from April 2020, lettings relief is only available if you share occupancy with the tenant.

Final Period Exemption April 2020

Previously, the final period exemption applied to the last 18 months of ownership of a property. However, from April 2020, this period has been reduced to nine months. This means that if you sell a property within nine months of it being your main residence, you will not have to pay CGT.

Entrepreneurs’ Relief  March 2020

From 11 March 2020, entrepreneurs’ relief was renamed Business Asset Disposal Relief, and the lifetime limit was reduced from £10 million to £1 million. Entrepreneurs’ relief, which allowed business owners to pay a reduced rate of CGT of 10% on the disposal of qualifying business assets, has been abolished. The Business Asset Disposal Relief (BADR) will apply a 10% rate of CGT on the first £1 million of qualifying gains made during an individual’s lifetime.

What Does These Capital Gains Changes Mean for You?

The changes to the capital gains tax system in the UK will affect different groups of people in different ways. The most notable individuals that will be affected are:

High earners

High earners will be the most significantly impacted by the proposed changes. The increase in CGT rates means that they will have to pay more tax when they sell assets that have increased in value.

Individual investors

Individual investors who have made significant gains on investments will also be affected by the changes. The reduction in the tax-free allowance means that they will have to pay more tax on their gains.

In conclusion, the Autumn Statement 2022 has brought about the most recent and significant capital gains tax in the UK. Overall, it’s important to stay up-to-date with tax changes and plan accordingly to minimize your tax liabilities.The recent changes in CGT regulations could affect you as a UK resident, especially if you are a landlord or a business owner.  With the lower thresholds in Capital Gains Tax allowance tt is essential to seek professional advice to understand how these changes could affect you and to ensure that you are paying the correct amount of tax. That’s where our Capital Gains Tax Accountants come in.

Should I Hire A Capital Gain Tax Accountant?

At MJ Kane, we specialise in UK tax and our team of capital gains tax accountants are up to date with all the changes in Capital Gains Tax Rules and regulations. Here are a few reasons why you might want to consider hiring one of our Capital Gains Tax accountants:

Expertise

Our CGT accountants specialise in UK tax law and can provide expert guidance on how to minimise your tax liability. We are up-to-date with the latest tax laws and regulations, and can advise you on the most effective tax planning strategies.

Time-saving

Preparing tax returns can be time-consuming, especially if you’re not familiar with tax laws. Our CGT accountant can take care of all the paperwork and filing, saving you time and hassle.

Avoid penalties

Failing to comply with tax laws can result in costly penalties. A CGT accountant can help ensure that you meet all your tax obligations, reducing your risk of penalties.

Maximise profits

With the reduction of allowance thresholds, it’s more difficult to fins opportunities to mitigate tax.  At MJ Kane, we want to ensure you receive the most our of your sale, our CGT accountant can help you identify all the tax deductions and credits you are eligible for, which can help maximise your profits.

Capital Gains Tax Changes FAQ

When will the Capital gains tax allowance changes come into effect?

The Capital Gains Tax changes are expected to come into effect in April 2023.

Will the Capital Gains Tax changes affect everyone?

No, the changes will only affect individuals and businesses that are subject to capital gains tax. Those who earn a dividend as a company shareholder will have to pay increased tax if for gains made outside the new threshold in April 2023.

Can I do anything to prepare for the Capital Gain Tax changes?

Yes, it is a good idea to review your investments and consider selling assets before the changes come into effect.