Tax Tip #7 TRY SOME CGT PLANNING
Where possible, you should try and use your CGT (Capital Gains Tax) annual exemption, which is currently £11,100. In addition to using the CGT exemption, it is sometimes also possible to claim loss relief from any losses you have had on the sale of assets. This is known as Loss Relief.
By using the annual CGT exemption, if you are a higher or additional rate taxpayers, you can save CGT at 28%, (£3,108 in tax). If you are a basic rate taxpayer the tax saving is worth up to £1,998.
Unfortunately, a gain can no longer be crystallised by selling and then repurchasing an investment “bed & breakfasting” – as the CGT rules do not allow you to personally purchase the same investment within 30 days of disposal.
There are however some strategies available that achieve similar results. A couple of examples include the following:
“Bed & ISA” or “Bed & SIPP” – If you sell an investment with a gain, you can buy it back immediately within a tax free ISA or put it in a SIPP. This can potentially allow you to use your CGT allowance and also move the asset to a tax free environment. The SIPP also has the added benefit of income tax relief on the contribution.
“Bed & Spouse” – You can sell an investment and your spouse can buy the same investment without worrying about the “bed & breakfasting” rules. Importantly however, the sale of the investment must not be to your spouse.