Preparing for Potential Capital Gains Tax Hikes: What Business Owners and Investors Need to Know

As we approach the Autumn Budget, there's been a lot of talk around potential changes to capital gains tax (CGT). With everything from the annual allowance to rates under scrutiny, and even the possibility of CGT resetting on death being questioned, now's the time to ensure you’re in the best possible position to manage your tax efficiently.

With rumours circulating about hikes as high as 39%, it’s natural to feel a bit anxious. But don’t panic – there are plenty of tax-efficient strategies you can use to minimise your CGT exposure, whether or not these changes come to pass.

My top tips for managing capital gains tax efficiently:

1. Use your CGT allowance wisely Each year, you have a ‘use-it-or-lose-it’ CGT allowance. This means you can realise gains up to a certain amount without paying tax. If you're sitting on a large gain, consider realising it gradually over several years, staying within your annual allowance (£3,000 for 2024/25). You can also move your investments into a Stocks & Shares ISA if you have allowance available. Doing this protects future gains and income from tax altogether.

2. Offset losses against gains Don’t forget to utilise any investment losses. You can offset these against gains, reducing your CGT bill. Even if your losses exceed your gains, you can carry them forward to future years.

3. Make the most of your spouse’s allowance If you’re married or in a civil partnership, you can transfer assets to your spouse tax-free. By doing this, you can take advantage of their CGT allowance as well. If they are in a lower tax band, it can also make sense to transfer income-generating assets into their name, reducing the overall tax you pay as a household.

4. Reduce your taxable income through pension contributions CGT rates are linked to your income tax band. By making pension contributions, you can reduce your taxable income and potentially pay CGT at a lower rate. This strategy is a win-win: you reduce your tax bill now and build up your pension fund for the future.

5. Don’t let tax speculation drive poor decisions Remember, investing is a long-term game. While it’s important to be tax-efficient, don’t let the fear of higher taxes push you into decisions you wouldn’t otherwise make. Time in the market often beats timing the market, so stay focused on your broader financial goals.

Final thought: Don’t wait for the Budget – act now!

Tax-efficient planning isn’t just for Budget season. If you’re not sure where to start or want to explore your options, I’m here to help. Let’s review your portfolio and make sure you’re in the best possible shape to weather any changes that may come.

Need tailored advice on capital gains tax or tax-efficient investing? Book a discovery meeting with me today to find out how I can help you manage your money more effectively and avoid unexpected tax bills in the future. Let's turn speculation into preparation.