CGT rises in UK set to take tax wastage mountain to £552 million, report shows

News - Tax

Written by Ray Clancy

Tuesday, 14 September 2010 08:45

Some £552 million is set to be wasted by Britons not being capital gains tax efficient, a huge rise due to changes in CGT, research indicates.

A report from the professional advice website unbiased.co.uk shows that the CGT rise from 18% for lower and 28% for higher rate tax payers will add £36 million to tax wastage mountain and it urges consumers to take action now to reduce the amount.

There is also a lot of ignorance about CGT, that charge that arises from the disposal of assets such as shares or buy to let properties, experts believe. Every individual has an annual CGT tax free allowance, which stands at £10,100 for the current 2010/11 tax year, but not everyone is aware of it.

The report points out that if you are married or in a civil partnership you each have an annual exemption and should ensure each of you maximise your CGT free gains.

There is also a ‘Bed and ISA’ option, a common form of CGT planning where investors sell investments or assets, use their annual CGT exemption and then buy the assets back within a tax efficient ISA in the new tax year, thereby ‘washing’ out the capital gains

Another option is ‘Bed and spousing’ where investors sell their investments or assets, then their spouse or civil partner buy them back, which means the gain materialises for the seller and any future gain is in the spouse's name and both of the couple are utilising their annual CGT exemptions.

‘Capital gains tax has been a hot topic ever since the chancellor announced the increased the CGT rate to 28% for higher rate tax payers. But even before that change, we have seen far too many people making unnecessary CGT payments simply by not making use of tax efficient ways when it comes to disposing of their assets,’ said Karen Barrett, chief executive of unbiased.co.uk.

‘There are many ways of reducing your CGT liability, but the tax system is complex and can easily be confusing for consumers to understand. Consulting an independent financial adviser is an easy way to get tailored tax advice on your individual tax liability, to help avoid making any unnecessary tax payments going forward,’ she added.