Autumn Budget capital gains tax changes – what can you do?

Labour’s capital gains tax (CGT) increases for both lower and higher-rate taxpayers in Rachel Reeves’ first Autumn Budget was a blow for investors.

What’s changed?

• The lower rate has increased from 10% to 18%.

• The higher rate has increased from 20% to 24%.

This brings it in line with current CGT on residential property, which is unchanged.

Investors now face paying more CGT on any profits from selling assets, including shares, thanks to these higher rates.

Heavy cuts in the CGT tax-free allowance over recent years haven’t helped either – the CGT allowance has been slashed from £12,300 to £3,000 in just a couple of years.

This allowance doesn’t stretch far, especially if you’ve been building an investment over the years.

An overnight CGT change – what it means for your tax bill

By introducing the change overnight, the chancellor cut options for investors to plan for the change and adds complications to calculating your taxable gains at the end of this tax year.

Gains realised between 6 April 2024 and 29 October 2024 will be taxed at a different rate to those realised from 30 October 2024 to 5 April 2025.

This change means investors with assets outside pensions and ISAs need to consider how they’ll keep their CGT bill to a minimum.

Fortunately, there are still ways to lower how much CGT you will potentially pay now and in the long run.

ISA, pension and tax rules can change and benefits depend on your circumstances. Tax rates and bands are different for Scottish taxpayers.

This article isn’t advice. If you're not sure if a course of action is right for you, ask for financial advice. Remember, all investments and any income from them can rise and fall in value so you could get back less than invested.

Our advisers are experts in tax-efficient financial planning, but in complex circumstances you might also need to speak to an accountant.

4 ways to cut your CGT bill

You get an annual £3,000 CGT allowance on a use-it-or-lose it basis.

If you’re building up a big gain, you might be able to realise it gradually, over a period of years.

You won’t pay CGT so long as you stay within your £3,000 CGT allowance each tax year.

You could use Share Exchange to sell your shares in an HL Fund and Share account – not forgetting about your £3,000 CGT allowance – and move the cash into a Self-Invested Personal Pension (SIPP), or Stocks and Shares ISA, and buy back the same shares again – all in one instruction.

You could get an extra boost by moving money into a pension thanks to tax relief.

How much you can pay in and the tax relief you get depends on your circumstances. Remember though, you can't usually access money in a pension until 55 (57 from 2028).

Before using Share Exchange take any charges for the deal and the new account charges into consideration. And remember you have to stick to your overall ISA and pension allowances.

Once that money is in your SIPP or ISA, it can grow free from UK income and capital gains tax.

If you’re married or in a civil partnership, you can transfer the ownership of some investments to your spouse or civil partner.

There’s no CGT to pay on the transfer. When they sell up, there might be tax to pay, but they have a CGT allowance of their own to take advantage of.

If your spouse or civil partner pays a lower rate of income tax than you, you could consider moving income-producing investments into their name, so the income will be taxed as theirs rather than yours.

When you complete your tax return, you can add details of the losses you’ve made, which will be offset against the gains when you’re calculating how much CGT you owe.

If you make more losses than gains, you should still make a claim for the extra losses, and if you still can, carry them forward into next tax year.