Wooden blocks spelling Tax 2023

17 Mar 2023

Your CGT allowance: use it or lose it

Rob Travis

Rob Travis

Senior Investment Director

With a sharp drop in the capital gains tax allowance coming soon, consider acting now.


As we approach the end of the tax year on 5 April it is, as always, crucial to arrange your finances effectively to make the best use of the tax-free allowances available.

Following last year’s Autumn Statement, this is more important than ever. The Chancellor announced several upcoming changes to the tax regime, amongst them a reduction in the capital gains tax (CGT) annual allowance from £12,300 to £6,000, with a further reduction to £3,000 planned for the following year.

So, what does this mean for investors and what changes should you make to your financial arrangements now? Here are some suggestions your advisor may put forward.

Use your full 2022/23 CGT allowance

Between now and 5 April, you may wish to crystallise gains within any of your taxable investments (i.e. those outside of a tax-efficient wrapper such as an ISA or SIPP) to use as much as possible of this year’s CGT allowance, before the limit is reduced.

Even if you do not need to withdraw cash from your investments, taking gains now will reduce the amount of CGT you may be liable to pay in the future. Once you have crystallised gains, you can either reinvest the proceeds into a different investment immediately, or wait 30 days to re-invest into the same holding.

Put this year’s CGT allowance towards next year’s ISA subscription

If you decide to crystallise gains right at the very end of this tax year, as outlined above, and you’re comfortable leaving the proceeds in cash for a few days until the start of the new tax year, you could then reinvest the funds as part of your fresh ISA subscription.

The caveat to this is the risk of being ‘out of the market’ for a few days (and potentially missing out on growth in these days). However, the 30-day rule stated above does not apply when selling a holding in your taxable portfolio (known as a general investment account or GIA) and repurchasing it in your ISA.

Register any capital losses that you have made in the past four years

Once the CGT allowance reduction kicks in, it will become much more restrictive to manage taxable portfolios without incurring CGT. One way to mitigate this is to ensure that you register with HMRC any capital losses that you have made in previous tax years.

You must register capital losses with HMRC (normally via a self-assessment tax return) within four years of the end of the tax year in which the loss arose, but once they are registered, they can be carried forward to future tax years indefinitely.

Consider paying tax whilst rates are still low

Since it is very likely that more people will have to pay CGT in future tax years (and therefore fill out a self-assessment tax return), it is worth remembering that the current rates of CGT are low by historical standards (and far below the current rates of income tax). CGT on investments is charged at a rate of 10% for basic rate taxpayers and 20% for higher rate taxpayers, compared to income tax at 20% and 40% respectively.

It is, therefore, entirely possible that CGT rates will rise in the coming years. If you have a foreseeable sale of assets upcoming, you may prefer to act sooner rather than later and pay the CGT due at the current rates.

Speak to your advisor for a personal recommendation

As well as this change to CGT, various other measures were announced last year that will not only make tax planning more restrictive but indeed more complex. If you would like to discuss any of these measures and how they affect your tax planning, or indeed any other matter, please don’t hesitate to contact me or a member of the Sheffield team.

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