Published On: Wed, Feb 7th, 2024

Just 2 months to beat Hunt’s double capital gains and inheritance tax grab so act fast | Personal Finance | Finance

Just 2 months to beat Hunt’s double capital gains and inheritance tax grab so act fast | Personal Finance | Finance
Just 2 months to beat Hunt’s double capital gains and inheritance tax grab so act fast | Personal Finance | Finance


Taxpayers can fight back and reduce their exposure, but must act quickly. The tax year ends at midnight on April 5, and you may need to do some complicated planning to max out this last gasp tax-saving opportunity.

Last year, Hunt slashed the threshold at which we start paying capital gains tax (CGT) from £12,300 to just £6,000. In April, it will fall to just £3,000.

At the same time, the amount of tax-free dividend income that investors can generate on shares or investment funds held outside of a tax-free Isa wrapper or pension plan will be halved from £2,000 to £1,000.

From April 6, 2024, it will be halved again to just £500.

Any dividend income above that will be taxed at 8.75 percent if you’re a basic rate taxpayer, while higher rate taxpayers pay 33.75 percent and additional rate taxpayers 39.35 percent.

The £325,000 inheritance tax threshold has been frozen since 2009. Thanks to Hunt, it will remain frozen until at least 2028, dragging more middle income families into the net.

Income tax thresholds will remain frozen until 2028, snatching more of our earnings as wages rise.

Here’s how to fight back.

Capital gains tax is charged on profits when selling assets such as a second home, investment property, business, antiques, jewellery, cryptocurrency or shares held outside of an Isa.

It’s charged at 10 percent for basic rate taxpayers or 18 percent if selling a property (not your home), while higher rate taxpayers pay at 20 percent or 28 percent.

If you hold any stocks (including old privatisation shares) or investment funds outside of an Isa, your gains may be subject to CGT.

Yet they will be free of all CGT inside an Isa, so take this chance to switch them inside the tax wrapper, said Alice Haine, personal finance analyst at wealth manager Bestinvest by Evelyn Partners.

You can do this quickly by selling them one day and buying them back the next, a process called Bed & Isa in the trade, she said.

Any gains may be subject to CGT but if you act before April 6, you can use today’s higher £6,000 CGT allowance to bank more of them tax-free.

Married couples and civil partners can pass assets to each other free of tax, which allows them to double up their CGT allowances and bank £12,000 of CGT-free gains in total.

Your Isa allowance is also a great weapon in the battle against Hunt’s dividend tax raid, as it allows you to take all your income from shares and funds tax free.

So again, Bed & Isa any existing income-generating investments and make sure you buy new shares or investment funds inside your £20,000 allowance.

If you don’t fancy investing in shares it is still worth considering putting money into a cash Isa, where all interest is free of tax for life.

Haine warned: “If you don’t use this year’s £20,000 Isa allowance by the deadline, you’ve lost it for good.”

Those worried about inheritance tax can reduce their exposure by making gifts to loved ones before the tax year ends.

READ MORE: Cash ‘not king’ as Isa savers pile into stocks and shares – check popular funds

Everyone can gift up to £3,000 each year with instant IHT exemption. So you could give someone £3,000 before April 6 and another £3,000 afterwards (that’s £6,000 in total).

Couples could double this to gift a total of £12,000.

Everyone can make further annual IHT-free gifts of up to £250 per person, as well as £5,000 to a child if they’re getting married, or £2,500 to a grandchild or great-grandchild who is getting wed, and £1,000 to a relative or friend.

Further gifts are known as “potentially exempt transfers” and only fully IHT-free if you live seven more years.

There is also a little-known option that involves making gifts from regular income to a loved one, which immediately become free of IHT.

Providing you have enough income left to meet your usual standard of living and spending needs, you can pass on as much as you wish within the exemption.”

The money cannot come from capital, though.

Done properly, it could allow families to move large sums out of the range of HMRC, especially if they have exhausted better-known gifting options. Explore every avenue and remember that time is running out.


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