Capital Gains Tax (CGT) is payable when you sell an asset for profit although every individual has an annual exemption which is an allowance on which there is no CGT to pay ( currently £11,300 for tax year 17/18 rising to £11,700 in 18/19). For some, therefore, it may be worth selling assets each year, such as unit trusts or shares, to realise gains and setting these against this annual allowance.
However, a little caution should be noted. Until March 1998, investors could sell shares and unit trusts and buy them back within a short time period, say the same day, allowing them to utilise the CGT exemption allowance and re-set the base cost at a higher value. This would result in future gains being calculated with reference to the new price therefore keeping down the actual gains made. This tax planning opportunity was removed at that time with a new rule which stated that any shares or units sold and re-purchased within 30 days would be ‘matched’ effectively meaning that the transaction hadn’t taken place for CGT calculation purposes. If you sell and re-purchase after 30 days these anti-avoidance rules do not apply. Disposals are identified against shares in the ‘share pool’ whereby a calculation derives an average share price ie. the total cost of shares would be divided by the total number held.
Not all assets are subject to CGT such as ISAs, sterling currency, foreign currency (personal use), cars, lottery winnings and gilts and gifting assets between spouses also do not cause a gain to be crystallised.
Always worth consulting a financial adviser or an accountant for specialised advice on this complex issue.