As part of the government’s budget in October 2022 the capital gains tax allowance is being reduced by 50%.
CGT or capital gains tax is applicable to profits you make from selling or disposing of an asset like a buy to let property or other asset of value.
The capital gains tax allowance permits you to not pay tax on any gain up to the CGT allowance threshold.
In the autumn 2022 budget the government decided to adjust the CGT allowance down meaning more people will qualify for capital gains tax.
The CGT allowance in the 22/23 tax year was set at £12,300 with the government estimating that the changes could effect in the region of half a million people in the 23/24 tax year with that figure rising the tax year after.
With such a big reduction in the tax free allowance it’s best to be prepared for the affects before you start disposing or selling any assets after the 5 April 2023.
What is the capital gains tax allowance for 2023/2024 tax year?
The capital gains tax allowance from April 2023 is £6000 and the government plan to reduce the allowance again in April 2024 to £3000.
This is a significant difference in a short space of time and could impact the timing of when assets are sold or gifted.
Will the capital gains tax rates change?
The actual capital gains tax rates haven’t been altered and will remain the same during the 2023/2024 tax year.
You still only pay CGT on the gain made on the asset sold or disposed of and you don’t have to pay capital gains tax if your income is below the tax free personal allowance in that tax year.
The capital gains tax rates are applicable based on an individuals income and the type of asset being sold or gifted.
Basic rate taxpayers are generally liable to 10% capital gains tax on most assets and 18% on residential property.
Individuals with income above the higher tax rate threshold will usually be taxed at 20% on most assets and 28% for residential property.
A main residence is not classified as an asset and remains exempt for capital gains tax purposes.
The dividend allowance is also being reduced which you can read more about in our blog about the dividend allowance from April 2023.
