The Latest Information About 2024 Capital Gains Tax Changes

Before we discuss the changes that capital gains tax has seen in 2024, let us know what capital gain tax is, and why it is so important.

Capital Gain Tax or CGT, can be defined as a form of tax that is charged when you sell, give away, exchange or otherwise get rid of any form of asset and make a gain or profit out of the activity. CGT is not the amount of money that you receive for any asset. However, it is a gain that is taxed. Broadly speaking, CGT can be calculated by comparing the sale proceeds (or the selling value of the assets) with their original prices (the value of the asset when it was procured). It is immensely important, as it will determine the amount of sales proceeds a business needs to retain and reinvest to make its financial position stronger, against the backdrop of these changes.

What changes has the current year has brought to the CGT?

The November 2022 budget witnessed certain changes being made in the Capital Gains Tax. These changes staggered across the year 2023 and 2024. Thus, if a business wants to maintain a steady business profile, it is crucial for it to take a close look at these changes in Capital Gains Tax and understand them. On this page, let us delve into the Capital Gains Tax changes in 2023 and 2024 and how these changes are likely to affect the business finances. We also discuss the strategies that businesses are likely to chalk out, to mitigate the impact of these changes.

The CGT Annual exempt amount (AEA) for individual and personal representatives for the 2023–24 tax year was reduced to £6,000, while for the trustees, it was reduced to £3,000. In the year 2024–25, these two figures are likely to get reduced to £3,000 and £1,000, respectively.

How these changes are likely to impact individuals and the business fraternity

The Capital Gains Tax changes in 2023 and 2024 are likely to impact the financial activity of businesses as well as individuals in multiple ways. For instance, it could influence disposal of assets and crucial investment decisions. The businesses will need to rethink the appropriate timing of asset sales. Or they will have to consider shifting to a more diverse and flexible investment portfolio. When it comes to individuals, more so with significant asset investments, it can lead to an increased CGT liability.

It goes without saying that the stakeholders need to opt for more proactive tax planning immediately. It has become the need of the hour more than ever before. What they need is assistance from a qualified tax advisor in Reading.

What strategies should be implemented to counter the effects of these changes? 

With the recent changes to the CGT and the resultant reductions in the AEA, businesses as well as individuals must implement various strategies to minimise the impact of the changes. Some of the most crucial strategies would include:

Using the allowances: Making the most out of the reduced AEA of £3,000. For those with assets to sell, planning disposals to maximise the allowance can be of great help.

Picking up the right time for sales: If and when any business has forecasts of a lower-income year, considering delayed sale of assets can be beneficial as it will help the business reap the maximum out of a lower CGT rate. It must consult experienced accountants in Reading for the right approach at the right time.

Transfer of Assets: This particular strategy is more suited for individuals than businesses. Transferring assets to a civil partner or spouse can reduce the CGT burden. This is because transfer of assets between two civil partners is exempt from tax.

The other significant strategies that can be adopted include Pension and ISA, as well as incurring offset losses.

For further information, you need to talk to Biz Accounting Solutions Ltd as we are one of the best to assist businesses and individuals alike in this regard.