In the last in the series of articles on end of tax year financial planning, we look at capital gains tax (CGT).
The CGT annual exemption for tax year 2013/14 is £10,900 (£11,000 for 14/15 and £11,100 for 15/16) which means an individual can crystallise gains of up to this amount without paying CGT. Thereafter gains are taxed at 18% for base rate tax payers or 28% for higher rate tax payers. Income uses the basic rate tax band of £32,010 first before capital gains.
If a taxable capital gain does occur you could consider deferral of tax by way of investment in an Enterprise Investment Scheme (EIS) – see previous article for information on these products.
Losses from previous tax years can be carried forward indefinitely and set against future capital gains.
Points to consider include:-
bringing forward disposals to 2013/14 (to help utilise the CGT exemption);
deferring disposals to 2014/15 or future tax years, bearing in mind that future tax rates and allowances may be less favourable;
make an outright transfer to a spouse or civil partner (or make an asset jointly owned) before a sale to help use both CGT exemption allowances. Transfers of this kind take place on a no gain/no loss basis;
although ‘bed and breakfasting’ is no longer an option, ‘bed and ISA’, ‘bed and bond’ and ‘bed and Sipp’ are viable.
Don’t forget that entrepreneurs’ CGT relief is available to business owners on sale or gift of their business. The first £10 million of gains that qualify for this relief is charged at just 10%.
Final message: there are only 1.5 weeks or so left of the tax year. If there is any planning that needs to be undertaken, get a move on!