Personal Tax

Utilising the capital gains tax annual exemption

Produced by Tolley
  • 27 Oct 2021 19:10

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Utilising the capital gains tax annual exemption
  • Why is this important?
  • Tax-free amount
  • No carry-forward
  • Restricted annual exemption
  • Nil annual exemption
  • Choosing how to use the annual exemption
  • Gains taxed at different rates
  • Current year losses deducted in priority to the annual exemption
  • When the annual exemption is preserved
  • More...

Utilising the capital gains tax annual exemption

Taxpayers may wish to consider basic tax planning arrangements in use the capital gains tax annual exemption. This type of tax planning is often reviewed at the end of the tax year.

This guidance note first looks at the annual exemption in detail and then various tax planning strategies that might be appropriate, depending on the family circumstances. It also considers actions to consider before the end of the tax year.

For other commentary that is relevant to year end tax planning, see the:

  1. Timing of disposal for capital gains tax and 'Bed and breakfasting' with shares, which consider the date of disposal of assets and the potential to delay the tax payment, and whether it is possible to dispose and reacquire an asset without triggering anti-avoidance rules

  2. Deferral of capital gains via reinvestment and Tax efficient investments guidance notes, which consider investments that provide the taxpayer with relief from one or more taxes for the current tax year, or are exempt from income tax and / or capital gains tax

  3. Utilising allowances and lower rate bands guidance note, which considers how to use the personal allowances and lower rate income tax bands within the family

Why is this important?

Tax-free amount

Each individual, whether or not they are resident in the UK, is entitled to an annual exempt amount when calculating the taxable amount of their chargeable gains for the tax year (although see the exceptions below). The annual exempt amount is also known as the annual exemption. The annual exemption is similar to the personal allowance for income tax in that the amount of gains covered by the annual exemption is not chargeable to capital gains tax.

The annual exemption is £12,300 for the 2020/21 and 2021/22 tax years and is frozen at this level until 5 April 2026.

No carry-forward

Any part of the annual exemption that is not set against gains in the tax year is lost. It cannot be

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