Capital Gains Tax Allowance Is Slashed to £6000 in April 2023

Key Takeaways

• Capital Gains Tax (CGT) is a tax on profits or gains made when selling or disposing of assets.
• The annual CGT allowance has reduced to £6,000 for individuals and £3,000 for trusts from April 6th, 2023.
• Investing in CGT-free coins such as Sovereigns, Britannias, and British Lunar coins from The Royal Mint can be a viable option for avoiding CGT.
• Exploring various options to manage CGT liabilities can be beneficial for investors.

Why Is Capital Gains Tax Important for Successful Investors?

Capital Gains Tax is a tax on the profits made when selling or disposing of an asset. It applies to a wide range of assets, including shares, property, and certain personal possessions. The amount of tax paid is calculated by subtracting the cost of acquiring the asset from the proceeds of the sale. CGT rules are complex and can vary depending on the asset and sale's circumstances.

Assets owned in tax-free accounts such as ISAs and pensions, as well as jointly owned assets by married couples or civil partners, are exempt from CGT. Additionally, there is an annual allowance for CGT, which is the amount of gains that an individual or trust can make each year without having to pay CGT. Prior to April 6th, 2023, the annual allowance for individuals was £12,300, while the allowance for trusts was £6,150.

What Is the Annual Allowance for CGT in 2023

The annual allowance for CGT has been reduced from £12,300 to £6,000 for individuals and £6,150 to £3,000 for trusts from April 6th, 2023. This means individuals and trusts can make gains up to these amounts without having to pay CGT. The changes are part of the government's efforts to balance the budget and reduce the deficit.

The reduction in annual allowance for CGT means that individuals and businesses frequently buying and selling assets will be impacted. For example, if an individual makes a gain of £7,000 on selling shares, they will pay CGT on the entire amount as the gain exceeds the new annual allowance of £6,000.

Should You Invest in CGT Exempt Coins?

Investing in CGT exempt bullion coins such as Sovereigns, Britannias, and British Lunar coins from The Royal Mint is a viable option for avoiding CGT. These coins are legal tender, and their value is exempt from CGT. Investors can sell the coins without having to pay any CGT on their gains.

Investing in CGT-free coins can be an attractive option for avoiding CGT. However, investing in coins can come with risks and potential downsides. The value of coins can be subject to fluctuations in the market. While coins are considered a stable investment, their value can be influenced by factors such as the rarity of the coin, the condition of the coin, and the demand for the coin.

Additionally, investing in coins can come with higher transaction costs, such as premiums and shipping fees, which can impact the investor's profits. Investors must also consider the potential loss of interest that comes with holding onto their coins, as well as the cost of storing them securely.

The Importance of Planning Your Investment Venture In 2023

The reduction in annual allowance for CGT from April 6th, 2023, can have a significant impact on taxpayers, particularly those frequently buying and selling assets. However, investing in CGT exempt coins from The Royal Mint can be an attractive option for investors seeking to avoid CGT.

Understanding the changes in annual allowance for CGT and exploring various options to manage CGT liabilities can be beneficial for investors. By doing so, investors can minimise the impact of CGT and maximise their returns on investments.