Following the autumn statement 2022, HMRC have issued details of the way in which the annual capital gains tax exemption will be reduced:
“This measure changes the CGT annual exempt amount (AEA).
- For the tax year 2023 to 2024 the AEA will be £6,000 for individuals and personal representatives, and £3,000 for most trustees.
- For the tax year 2024 to 2025 and subsequent tax years the AEA will be permanently fixed at £3,000 for individuals and personal representatives, and £1,500 for most trustees.
The measure also fixes the CGT proceeds reporting limit at £50,000.”
In statutory terms, the details are explained by HMRC as follows:
“Current law
The rules for the AEA are found at sections 1K and 1L of, and Schedule 1C to, the Taxation of Chargeable Gains Act 1992. Section 1K provides that the AEA is £12,300. Schedule 1C provides that the AEA available to most trustees is one half that due to individuals, effectively £6,150. It also provides for different amounts in relation to disabled person trusts, groups of trusts and trusts arranged into sub-funds. Section 1L provides that the AEA is increased annually in line with increases in the consumer price index (CPI).
Finance Act 2021, section 40 froze the AEA at £12,300 up to and including tax year 2025 to 2026.
The CGT reporting proceeds limit is found at section 8C of the Taxes Management Act 1970. Amongst other things it requires persons who are within self-assessment to only complete the CGT pages where the total amount or value of the consideration for all ‘chargeable disposals’ of assets made by the person in the year exceeds four times the AEA.
Proposed revisions
Legislation will be introduced in the Autumn Finance Bill 2022 amending section 1K to reduce the AEA to £6,000 for tax year 2023 to 2024, with a further reduction to £3,000 for tax year 2024 to 2025 and subsequent tax years. The AEA available to most trustees will remain at one half that due to individuals.
That legislation will also abolish the annual uprating of the AEA with CPI and fix the CGT reporting proceed limit at £50,000.”
Related content from Claritax Books
Written for accountants and other tax advisers at an intermediate level, Capital Gains Tax is built firmly on a foundation of statutory rules and case law principles. It is illustrated throughout with practical examples, and most chapters include a summary of pitfalls and planning points.
