Capital gains tax (CGT) can be a complex area for investors to navigate, especially with the recent changes in rates that came into effect on 30 October 2024. Shaun Moore, a tax and financial planning expert at Quilter, explains how investors can optimize their tax position in the current tax year.

Before the Autumn Budget, gains were taxed at lower rates compared to gains made after the rate change. The basic rate of CGT increased from 10 to 18 per cent, while the higher rate increased from 20 per cent to 24 per cent. These rates apply based on whether you are a basic rate taxpayer or a higher rate taxpayer.

The good news is that investors can utilize their annual tax-free CGT allowance and any capital losses in a tax-efficient manner. This means that the allowance and losses can be strategically applied against gains made after 30 October, which are subject to the new, higher rates of CGT. By doing this, investors can minimize their tax liabilities and maximize their tax savings.

For example, if an investor has gains both before and after the rate change, they can offset their losses and allowance against gains made after 30 October, rather than against gains made earlier in the tax year. This approach ensures that losses and allowances are used to reduce tax exposure to the higher CGT rates, resulting in lower overall tax payments.

It’s important for investors to make use of every available tax relief, especially with the reduced CGT allowance and higher tax rates. Capital losses can be carried forward indefinitely to offset against future gains, as long as they are reported to HMRC within four years of occurring. Married couples and civil partners can also benefit from transferring assets between them to maximize their CGT allowances.

In conclusion, investors should strategically utilize their CGT allowance, carried forward losses, and spousal exemptions to minimize their tax liabilities for the current tax year. By offsetting allowances against gains made after 30 October 2024, investors can take advantage of lower tax rates and optimize their tax position. It’s important to seek professional advice to ensure compliance with tax regulations and maximize tax savings.