UK Year End Planning – Using your UK Capital Gains Tax (CGT) Allowance
The 2015/16 UK tax year will come to a close on 5 April 2016. Each year UK resident individuals paying tax on the Arising Basis are provided a capital gains tax allowance whereby the capital gains are exempt from tax until surpassing the relevant threshold for the year. For the 2015/16 tax year, the UK CGT allowance is £11,100. So, from a UK perspective, the first £11,100 of gains realised per individual is excluded from tax regardless of income levels.
As part of a year end planning strategy, it is worth reviewing whether you have fully utilised your available UK CGT allowance for the current tax year. Any unused allowance at the end of a tax year is lost and is unable to be carried forward. Utilising this allowance can save a little more than £3,000 in UK tax for a higher or additional rate taxpayer.
Whilst stock markets have not been strong, and you might not think there are any gains in your portfolio to be realised, it is important to remember to review your unrealised positions in GBP terms. If you are an American with investment assets in USD, it is very possible that positions which show as unrealised losses in USD terms are unrealised gains in GBP terms. The USD has steadily strengthened against the GBP since July 2014 and now sits roughly 20% higher than it did 18 months ago.
Reviewing your capital gain allowance situation ahead of the UK tax year end may end up being very beneficial and may help you minimise any unnecessary costs or tax charges in the future.
For more wealth planning tips and tidbits from MASECO read our 39 Steps to Smart Living in the UK.
Risk Warnings and Important Information
The above article does not take into account the specific goals or requirements of individual users. You should carefully consider the suitability of any strategies along with your financial situation prior to making any decisions on an appropriate strategy.
MASECO LLP trading as MASECO Private Wealth is authorised and regulated by the Financial Conduct Authority, the Financial Conduct Authority does not regulate tax advice. MASECO Private Wealth is not a tax specialist. We strongly recommend that every client seeks their own tax advice prior to acting on any of the strategies described in this document.