Changes to the CGT Allowances
Updated: May 11
In his 2022 Autumn Statement, Chancellor Jeremy Hunt announced significant changes to the CGT allowances to help increase the Treasury's coffers.
At that point, the capital gains tax (CGT) allowance was £12,300 per person, meaning that anyone could make a gain of up to £12,300 on assets such as shares, antiques, or property (other than their principal private residence) before having to pay tax.
In his Autumn Statement, the Chancellor announced two considerable changes:
The CGT allowance would be reduced from £12,300 to £6,000 from April 2023.
It will be reduced again to £3,000 from April 2024.
Furthermore, the annual CGT allowance for trusts has been reduced from £6,150 to £3,000 from April 2023.
Who pays CGT?
CGT is paid by individual taxpayers, trustees and personal representatives of estates.
How is CGT calculated?
CGT is the difference between an asset's acquisition and disposal price, where an uplift in value has occurred. When calculating the difference in value, taxpayers can deduct allowable expenses, including legal or other professional fees incurred as part of the transaction. The acquisition price could also relate to assets that have been gifted or inherited and not just bought outright.
Where an asset is owned jointly, for example, a husband and wife jointly own a private residential property, they can both claim the annual CGT allowance, i.e. for the 2023-24 tax year they can claim £6,000 each against their tax liabilities.
What rate of tax is paid on CGT?
Although changes were announced to the annual CGT allowance, the tax rates remain unchanged. These are:
For basic rate taxpayers – 10% (18% on gains from residential property).
For higher rate and additional rate taxpayers – 20% (28% on gains from residential property).
For trusts, the rate is 20% (28% for residential property).
Deadline for reporting and paying CGT on property
UK residents who have made a capital gain following the disposal of residential property have only 60 days to report this gain and pay any CGT due to HMRC. This follows a change in the CGT rules in 2020. Further information about this can be found in our blog, 'New 60-day deadline to report and pay CGT on certain property disposals'.
Here to help!
While the Government keeps saying they want to simplify the tax system in the UK, the constant changing of allowances and tax rates does make things harder rather than easier.
Calculating CGT can be confusing, so get in touch if I can help make sense of it all and give you an accurate picture of what tax you owe and when you will need to pay this. Simply email email@example.com or call me at 0116 216 7681.