How to Increase your Capital Gains Tax Exemptions

Property Tax

Anti-avoidance laws were introduced by HM Revenue & Customs (HMRC) to prevent people from seeking ways to cut their tax bill. However, the laws are not always restrictive, which is especially true where Capital Gains Tax (CGT) is concerned. Everyone can make a certain amount of tax-free capital gains each year on their assets. It is only when the amount exceeds your annual exemption amount that it is liable to CGT of up to 28%. So, if you increase your CGT annual threshold the less CGT you will have to pay – there are three easy ways in which you can do this:

Share assets with your spouse
This step works if you have already used your CGT annual exemption. You simply need to give the assets to your spouse to sell. Anti-avoidance rules do still apply, so your spouse will only make the same gain you would have, but they can use their exemption allowance to reduce the CGT that is applied. For this to work you need to be married; otherwise HMRC will see you as selling the assets to your spouse and not transferring them.

Share assets with your partner
If you are not married, there are still ways to increase your CGT annual exemption; you just need to plan for the long-term. In order to do this, simply transfer assets that you think will gain value over time to your partner. Once the assets begin to increase in value your partner can then sell the assets and use their exemption to reduce the CGT that is applied.

Share assets with your children
Children have a CGT exemption too; therefore you can follow the same process above and transfer assets you believe will increase in value to your children. The anti-avoidance laws only prevent you from diverting assets to your children to save yourself tax, they do not affect your children’s CGT exemption. Therefore, if you’re planning for the long term, it’s best to transfer the assets to your children while they’re young. You will still need to pay tax on any income made from the assets, but when they are sold the CGT will be applied to your children, not you. They will also only be taxed if it exceeds their CGT allowance.