As promised, now the dust has settled on the Autumn budget announced by the chancellor Jeremy Hunt. In this article, I go into more detail on what this means for you.
My starting point is going to be capital taxes, with the main change being the reduction in the annual exemption from 6th April 2023.
As a reminder, the current annual exemption stands at £12,300, this is now going to reduce as follows:
The annual exemption is the amount used against any capital gains made in a tax year. So, as an example, say you made a gain of £20,000 on the sale of shares in the 2022/23 tax year. The £12,300 would be deducted from this amount, leaving a gain chargeable to tax of £7,700. If you make that same gain in the 2024/25 tax year, £17,000 will be charged to tax.
Now, let’s say the above applies to a higher rate tax payer, on which 20% tax is paid on the gain. The difference in capital gains tax due would be as follows:
2022/23 – tax due – £1,540
2024/25 – tax due – £3,400
That’s an increase in tax of £1,860, so in fact over double what you would have previously paid. This is clearly not insignificant.
This change is coming and there is little we can do about it. However, one point to make at this stage, if you are thinking about selling/gifting a capital asset such as shares or an investment property in the near future, you may want to do this before the 6th April 2023.
You would do this on the basis you still had your full annual exemption for the year, if you had already utilised it on other capital gains, clearly you would be no better off making a gain before the end of the tax year.
I layout an example below based on the following facts:
Under this option there would be a total chargeable gain of £75,400 (£100k less 2 times £12,300). As a residential property this will be charged to capital gains tax at 28%, resulting in tax due of £21,112.
The chargeable gain this year would be £88k, leaving capital gains tax due of £24,640.
This would leave a chargeable gain of £94,000, with tax due of £26,320.
So, in summary as a worst case you would be looking at an additional tax bill of £5,208 on that £100k gain. That is a significant amount.
The above hopefully adds a little more context to the effect this change could have on you personally.
Also, please keep in mind I am looking at this solely from a tax perspective, there would also be investment decisions to be made as part of the sale of any capital asset.
If you would like to discuss any of the above in more detail, please do not hesitate to get in touch with Sidaways’ team of chartered accountants in Exeter.
Thanks for reading
Daniel Routcliffe FCA CTA
---
Dan Routcliffe
Email: dan@sidaways.co.uk
Tel: 01392 360008
More Posts by Dan
More Posts in Tax
Fill out the form below and a member of our team will get back to you.
