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Capital gains tax allowance to be halved

On 6 April 6 2023, the capital gains tax annual exemption will fall to £6,000 from its current level of £12,300. This will potentially make hundreds of thousands of people liable in the 2023-24 tax year. The Chartered Institute of Taxation (CIOT) has warned that many will probably be unaware of the change.

When is capital gains tax due?

You will be liable to pay capital gains tax when you make a financial gain by selling a personal possession or asset worth £6,000. Typical examples include a property that’s not your main home, such as a holiday rental, commercial building or buy-to-let investment property. 

Your main home could attract capital gains tax if it is very large, or if you have rented it out or used it for business. While vehicles are exempt, stocks and shares and business assets are not. If you plan to dispose of crypto assets (e.g. Bitcoin or other crypto currencies) you should check if any tax is due.

If the asset is jointly owned with someone else (e.g. your spouse or business partner), you will need to pay capital gains tax on your share.

How is the capital gains tax allowance changing?

Currently, you only start paying capital gains tax above £12,300, but from April this will be reduced by more than half to £6,000, its lowest level since 1995/96. In April 2024 it will be cut further to £3,000, meaning even more people will be caught in the capital gains tax net.

Combined with changes to dividend tax and freezing tax thresholds, there are fears that the tax burden is hurting businesses by inhibiting growth and entrepreneurship.

What will be the impact of these changes?

The CIOT is warning that the lowered capital gains tax allowance will mean that thousands of people will be required to fill out a self-assessment tax return, and possibly pay more tax. However, many of those affected may not be aware they need to take action until it is too late. The CIOT is urging the government to launch a publicity campaign raising awareness of the changes.

Those affected could include people with small share portfolios, overseas residents owning UK property and second home owners (including foreign holiday homes). John Barnett, chair of CIOT’s technical policy and oversight committee, said: “A lower annual exemption means some people making smaller gains will now need to pay tax when they previously wouldn’t have.

“We are concerned that many of those now brought into the net will not be aware of this and could be left with tax bills and penalties as a result.
“Coupled with a similar lowering of the income tax dividend allowance, there may be a big increase in the number of people on a smaller income scale who will now be required to fill in a tax return and pay tax.

“We urge the government to publicise these changes so that as many as possible of those who will be affected by the lowered allowance know their responsibilities and don’t end up with a surprise tax bill in the future.”

How much money will the government raise?

The changes are expected to raise £420m in 2024-25, rising to £855m by 2027-28. Figures from the Office of Tax Simplification (OTS) suggest a £6,000 allowance will see an extra 250,000 people paying capital gains tax and around 150,000 people required to complete a self-assessment tax return.

Need advice?

If you are worried about the changes to the capital gains tax allowance, our friendly team provides a full range of tax planning and business advisory services for businesses of all sizes. Call us on 01462 687333 or email

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