Every time you sell something the taxman takes a look to see if you’ve made a profit or not. Under normal circumstances this is not an issue.
As anyone who has sold their own car will tell you - losing money is easy. However, with investments, the whole idea is to make a profit for your future - and this is where the taxman gets interested.
Whenever you profit from the sale of an asset - the taxman deems you to have made a capital gain. This is calculated on the difference in value between the price at which you bought the asset (or its value if you were given it) and the price at which you sold it, minus any expenses incurred in the transactions. Capital Gains Tax (CGT) is something that many can be liable for but very few pay in full. This is because with just a little bit of planning, you can minimise your liability.
First, you have an annual allowance and you should always use this. You can, for example, sell just a proportion of your assets each year so the gain remains within it. You can also use your partner’s allowance - as transfers between spouses are CGT free. In addition, there are Individual Savings Accounts (ISA’s) which shelter investments from CGT completely. Also, if you make a loss on an asset, you are able to use that loss to offset against other gains. Finally, if you hold an asset for an extended period of time, you can benefit from taper relief. This is not an exhaustive list but good advice will help ensure you minimise your liability.
Minimising tax, especially CGT, is something that we spend a great deal of time talking to our clients about, whether it be setting investments up in the correct way initially or indeed exiting at the right time. Planning and advice is vital if you are to keep as much of your gain as possible.
This is true now more that ever with the proposals announced in the recent Pre Budget Report. As with all changes these proposals will bring winners and losers, we can discuss with you the implications of these proposals to ensure that you retain the maximum amount of profit when you come to sell your investment.
