Anyone in the United Kingdom who makes a profit from selling, gifting, transferring or exchanging certain assets could be subject to Capital Gains Tax (CGT).
Typically, these assets include things like shares, collective investments and personal possessions worth £6,000 or more, as well as property that is not your main home.
The rate of tax that high-earning taxpayers have to pay when it comes to CGT is 20% on gains from investments and 28% on gains from residential property, while for basic-rate taxpayers the rates drop to 10% and 18% respectively.
How to reduce Capital Gains Tax
There are some different methods that you can try to reduce the amount you pay with regard to CGT, which will then mean you have more money to put towards the future.
Use your Capital Gains Tax exemption
You are able to make tax-free gains of up to £12,300 in the 2021/22 tax year as part of your annual CGT exemption. It’s worth noting that you are not able to carry this exemption over to the next tax year.
Make the most of losses
It is possible to limit your CGT liability by making the most of losses to reduce your gain. Any gains and losses from the same tax year must be offset against each other, which then effects the amount of gain that is subject to tax.
Transferring assets to spouse or civil partner
You will be exempt from CGT if you make a transfer to your spouse or civil partner, so assets are able to be transferred from one partner to the other. What this does is double the CGT exemption to £24,600 for married couples and civil partners.
Giving shares to charity
One way of getting income tax relief and CGT relief is by giving land, property or shares to a charity.