Capital gains tax: 10 ways to reduce how much tax you need to pay to HMRC

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Every year Britons are forced to fork out billions in Capital Gains Tax (CGT). However, there are 10 ways people can pay less tax which could offer some significant savings.

Currently, the capital gains tax allowance is set at £12,300 for individuals – Britons can double this if they are part of a couple.

Typical investments that Britons might have to pay capital gains on include:

  • A second property or buy-to-let
  • Shares and funds (not ISAs or a pension)
  • The sale of a business
  • Possessions sold for more than £6,000.

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How much capital gains is paid depends on whether someone is a basic rate or higher rate taxpayer.

Presently, the rate for basic rate taxpayers is 10 percent, rising to 20 percent for higher-rate taxpayers.

This rises to 28 percent on gains from residential property.

However, experts at Brewin Dolphin have come up with 10 ways people can legally reduce their capital gains tax bill.

10 ways to reduce capital gains tax:

  • Use your £12,300 allowance – it can’t be carried over to the next tax year
  • Make use of losses – these can be offset against each other
  • Transfer assets to a spouse or civil partner – no CGT to pay
  • Invest in an ISA
  • Contribute to a pension
  • Give shares to charity
  • Invest in an Enterprise Investment Scheme which are free from CGT if held for three or more years
  • Claim gift hold over relief
  • Some antiques are CGT tax free
  • Speak to a professional

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One of the easiest ways of avoiding this tax is by transferring assets between spouses or civil partners.

If Britons can’t avoid paying capital gains they can work out how much they need to pay by working out their gain or loss when they dispose of an asset.

HMRC has more information on its website where people can use the calculator to work out exactly how much they need to pay.

It’s a good idea to seek independent financial advice if people are still unsure.

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