How to reduce your Capital Gains Tax Liability

The amount of CGT paid has tripled since the same period a decade earlier. Below, we’ve outlined some ways to reduce the tax liability on capital gains. What does CGT apply to exactly?

Calculating capital gains tax liability

As an example, you’ll pay CGT on any profits you make when you sell shares, a second home and some personal possessions you sell for more £6,000. As an individual any profits over £12,300 (as that’s the current CGT exemption) are chargeable. CGT liability is paid as a percentage, and the amount you pay will depend on which tax bracket you fall into. For example, the rate for higher and additional rate taxpayers is 28 per cent on property and 20 per cent on other assets. For basic rate payers, it’s 18 per cent and 10 per cent respectively.

How to be more CGT efficient.

Open up an ISA

You can invest up to £20,000 a year in an ISA without having to worry about capital gains tax liability. That sum doubles for those who are married or in a civil partnership since it’s possible to combine allowances.

Transfer assets

By transferring assets to your spouse or civil partner in a lower tax bracket, you can reduce your CGT liability. Alternatively, you can make use of their allowance, meaning – you could potentially save up to £24,600 this way without having to worry about paying CGT.

Carry forward losses

Provided you record a loss in your tax return for a particular year, you can carry it forward to the next year and offset it against any profits made from the sale of assets.

Spread sale over assets

By selling half your assets one year and the other half the following, you can benefit from the tax-free allowance for each separate year – meaning you’ll double the CGT liability allowance.

Pay more into a pension

Putting money into a pension means you’re deducting it from your overall earnings, so it could help keep you in a lower tax band, meaning you would be able to keep your CGT rate at 10 per cent for non-residential assets.

Open up an EIS

You won’t pay CGT on any gains made in an Enterprise Investment Scheme (EIS), provided you have held the account for at least three years.

Give shares to charity

Shares, property or land which is handed over to charity are eligible for CGT liability relief.

Hold on to your assets

Any capital gains tax liability is wiped out after your death. That’s because inheritance tax takes over at this point. Yes, you won’t benefit from the savings, but at least your family won’t miss out since there won’t have been CGT and Inheritance Tax paid on the same assets.

Consider what you invest in

Any gains made on antiques and collectables can be tax-free. That’s because assets expected to have a life of 50 years or less are considered ‘wasting assets.’ This category includes old clocks, caravans, leisure boats and vintage cars. Crucially though, paintings and jewellery aren’t considered ‘wasting assets’, so any profit over £6,000 will usually be subject to CGT.

Get in touch

To find out how we can help you reduce tax liability on capital gains – or assist with other accountancy matters, please get in touch with the team here at Karbhari & Co Chartered Accountants and Registered Auditors. Call us on 020 8911 811 or email See our website at

Don’t delay in submitting and paying self-assessment tax

Whilst HMRC has announced that it is waiving late filing and late payment penalties on self-assessment tax returns for one month, those required to submit a self-assessment tax return are being urged not to use this as an excuse to delay.

Of the 12 million tax payers required to submit a tax return by 31st January, only around half had done so by 6th January, leading HMRC to issue the extension to the traditional end of January deadline.

However, in announcing the waiving of penalties until the end of February, effectively giving tax payers an extra month to submit and pay, HMRC also encouraged individuals to submit and pay on time if they can. Whilst penalties are being waived for this brief period, interest will continue to be calculated from 1st February, so if you can submit and settle before the traditional deadline it is prudent to do so.

Covid still having an impact

Aware that covid is still causing issues for individuals and their agents/accountants, HMRC hoped the extra time would give people the opportunity to meet their obligations without worrying about receiving a penalty.

The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:

  • anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty, as long as they file online by 28 February
  • anyone who cannot pay their Self-Assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

The existing Time to Pay service allows any individual or business who needs it the option to spread their tax payments over time. Self-Assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.

Back to back interest rate rises

With prices rising across the board, the Bank of England has stepped in to try and cool the market announcing an increase in interest rates. The rise, which is the second in three months and the first back to back increase in almost two decades, means interest rates will increase from their current 0.25% to 0.5%.

The move by the Monetary Policy Committee (MPC) came as the Chancellor was taking to the floor of the house of commons to announce a series of measures designed to offset in part, the hike in energy prices that Ofgem had announced just hours before.

Perfect storm for cost of living

The much anticipated announcement by Ofgem, means that the energy price cap – the maximum amount customers can be charged by energy companies on their standard (non fixed) tariff – has increased by 54%, adding almost £700 a year to people’s bills.

Combined with planned increases in National Insurance and rising costs elsewhere caused by supply shortages, higher wages and Brexit; the increase in energy costs creates a perfect storm for the cost of living and is likely to hit low and middle income families hardest.

Pressure on interest rates

There was always going to be pressure on the Bank of England to increase rates, which have remained at historically low levels since 2009, as they can help to temper volatile markets and offer some inflationary control. With inflation (CPI) expected to hover around 6% across 2022, peaking in April at more than 7%, there was even pressure from within the Banks own ranks for a bigger rise now. When the MPC met on 3rd February, Four out of Nine of its members voted to increase the main rate by 0.5% to 0.75%, in a bid to stave off more sustained inflation and price rises.

Whilst the decision was a smaller increase now, news of the pressure for an injection of pace to proceeding within the MPC, will give the markets a clear signal of the direction of travel. A return to the 5% interest rate levels seen before the financial crisis in 2009 is some way off and guidance from the MPC remains around smaller incremental steps, but the reality is this is likely to be the first in a series of those steps. Some have suggested we may see decisions on rate rises taken outside of the planned meetings of the MPC over the coming months, but at the very least, don’t be surprised if we see successive increases when the MPC does meet in 2022.