During the Autumn Statement and Spring Budget, Chancellor Jeremy Hunt announced upcoming changes to Capital Gains Tax (CGT). These changes came into effect in April 2023, at the start of the 2023–2024 tax year.
CGT is charged on any profits you make from selling assets, such as property that’s not your main home, shares, business assets and many personal possessions, so it’s likely that these CGT changes will affect a wide variety of individuals including landlords. What do the new changes mean for you? Let’s take a look.
CGT annual exempt amount (AEA) reduced
Back in 2020, the Office of Tax Simplification (OTS) released a review which recommended that the CGT allowance was reduced. It seems that the government has taken on this advice, and for this tax year (2023–2024) the AEA has been reduced by over half, from £12,300 to £6,000 for individuals and personal representatives. From next year (the 2024–2025 tax year) the AEA will be slashed again to £3,000. The government has said that this rate will be permanently fixed.
The AEA for trustees will remain at half of that for individuals, so for 2023–2024 this will be £3,000, reducing to £1,500 in 2024–2025.
In addition, the proceeds reporting limit will be fixed at £50,000.
The government has said that the reduction in CGT AEA will make the system fairer and more sustainable, with higher earners ‘taking on a larger burden’. For further information, please take a look at the government’s policy paper.
Changes to the transfer of assets for separating couples
Assets transferred to your spouse are given on a ‘no gain, no loss’ basis, meaning that CGT is only triggered when the asset is disposed of by the receiving spouse – as long as you are living together. Previously this caused a bit of a sticking point for divorcing or separating couples because this was only applicable for the remainder of tax year in which the couple separated. Once the new tax year began, any transferred assets would be classed as a disposal and therefore liable for CGT as normal. This deadline no doubt added further stress and urgency to separating couples, particularly those separating within a few months of the end of the tax year.
Luckily the rules for separating couples have now relaxed, giving couples more time to get their affairs in order. The ‘no gain, no loss’ rule has now been extended for up to three years for partners who are separating and for an unlimited time if it occurs formally through a divorce or dissolution agreement. In addition, the partner remaining in the family home can potentially claim private residence relief when selling the property (if certain requirements are met).
Making the most of your CGT allowances
With the AEA set to reduce by half again next year, many landlords, other individuals and separating couples may feel that now is a good time to review their situation and take precautions. If you’d like further guidance and support regarding your financial affairs, please get in touch with our accountancy team. Our friendly and knowledgeable accountants can help you maximise your allowances and ensure that you’re making the most of any available relief. Please visit our Capital Gains Tax webpage to find out more.