The latest adjustments to Capital Gains Tax (CGT) carry significant implications for individuals, trustees, and personal representatives involved in the sale of assets or property.
With the Annual Exempt Amount for CGT halved from £6,000 to £3,000 from 6 April 2024, the landscape for capital gains on residential properties is poised for substantial change.
Additionally, a notable shift in policy will see the higher rate of CGT on residential property gains from the sale of second or additional homes reduced from 28% to 24%.
Who will feel the impact?
This adjustment predominantly affects those liable to pay CGT on gains from residential properties.
However, it’s important to note that Private Residence Relief (PRR) will still apply to disposals of main residences, offering protection for individuals selling their primary home.
The reduction in the higher CGT rate from 28% to 24% is designed to encourage the earlier disposal of second homes, buy-to-let properties, and other residential assets.
The Government hopes that this will invigorate the property market by increasing transactions, thereby assisting individuals looking to move home or step onto the property ladder for the first time.
Time to act
With the annual exemption amount decreasing to £3,000, property owners must plan their disposals strategically.
Transfers between spouses, which are treated as “no gain, no loss” transactions, present a unique planning opportunity in this respect.
Such transfers do not trigger CGT and allow the receiving spouse to inherit the original base cost of the asset.
This provision enables couples to maximise the use of their combined annual exemptions, underscoring the value of joint planning to optimise tax efficiency.
In light of these changes, property owners, especially those with potential CGT liabilities on residential properties, should consider strategic asset transfers.
For tailored advice and strategic planning around these CGT adjustments, consulting with a tax professional is highly recommended. Please speak to our team today.