The Capital Gains Tax (CGT) Allowance is a threshold that determines how much profit you can make from selling certain assets without paying tax. This allowance is reset annually, affecting the amount of CGT you need to pay on profits exceeding this limit.
CGT Allowance for 2023/24
- 2022/23 Tax Year: £12,300
- 2023/24 Tax Year: £6,000
What is Capital Gains Tax?
Capital Gains Tax is levied on the profit gained from selling investments or assets, including but not limited to:
- Property (excluding your main home under most circumstances)
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Stocks and shares
- Fine jewelry
- Cash inheritance
- Vehicles
CGT Rates
The CGT rate you're subject to depends on the type of asset sold and your income tax band:
- Shares: 10% for basic rate taxpayers, 20% for higher rate taxpayers.
- Residential Property: 18% for basic rate taxpayers, 28% for higher rate taxpayers.
- Cryptocurrencies: 10% for basic rate taxpayers, 20% for higher rate taxpayers.
- Other Assets: 10% for basic rate taxpayers, 20% for higher rate taxpayers.
Key Points About CGT Allowance
- Joint Ownership: If you co-own assets, you and the other owner can combine your allowances, effectively doubling the tax-free profit potential to £12,000 for the 2023/24 tax year.
- Non-Carry Over: Unused CGT allowance from one tax year cannot be carried over to the next.
- Separate from Personal Allowance: The CGT allowance is independent of the Personal Allowance, which applies to different types of income (e.g., salary, rental income).
Handling Losses
If you incur a loss on an asset sale, this loss can offset gains from other asset sales within the same tax year. For instance, a £15,000 loss from selling one Cryptocurrency can be deducted from a £40,000 gain from another, resulting in a net gain of £25,000. You would then only pay CGT on any profit above the £6,000 allowance, which would be £19,000 in this example.
Understanding and managing your CGT allowance efficiently can significantly impact your tax liabilities, especially when planning asset sales and investments throughout the tax year.
