Capital gains tax (CGT) planning
March 26, 2012
Every individual has an annual CGT exempt amount, which in 2011/12 and 2012/13 makes the first £10,600 of gains free of tax. Gains above the annual exempt amount are taxed at 18% where taxable gains and income are less than the basic rate limit of £35,000 in 2010/11 (£34,370 in 2012/13) and at 28% on gains that exceed this limit.
You should generally aim to use your annual exempt amount by making disposals before 6 April 2012. If you have already made gains of more than £10,600 in this tax year, you might be able to dispose of investments standing at a loss to create a tax loss that can be set against the gains.
If your disposals so far this tax year have resulted in a net loss, the decision whether to dispose of investments to realise gains before 6 April 2012 will depend on the amounts involved.
Depending on your level of income, timing your disposals either before or after the end of the tax year could result in more of your gains being taxed at 18% rather than at 28%.
You might be able to save CGT by transferring assets between married couples or civil partners before their disposal. This could save tax where one partner has an unused annual exempt amount, has not fully used their basic rate tax band, or has capital losses available. You should generally leave as much time as possible between the transfer of the assets and their subsequent sale.
CGT is payable on 31 January after the end of the tax year in which you make the disposal. You could delay a major sale until after 5 April 2012 to give yourself an extra 12 months before you have to pay the tax liability.
Shares or assets you own might have become virtually worthless. If so, you can claim the loss against your capital gains without actually disposing of the asset by making a negligible value claim. You can backdate the loss relief to either of the two tax years before the one in which you make the claim, provided that in the earlier year you owned the asset and it was already of negligible value. 5 April 2012 is the time limit for backdating a claim to 2009/10.