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

Crack down on second home tax relief

Second home owners that make their properties available for holiday rentals are being targeted under new rules outlined by the Levelling Up Secretary, Michael Gove. The change to the rules will specifically target those whose second homes are registered for business rates as they are let out for holiday rentals.

By identifying the property as a lettings property, rather than a main residence, owners can avoid paying council tax and instead register for business rates. They can then in turn claim small business rates relief, in some cases meaning they end up paying no rates at all. However, it is suggested that that some owners are using this loop hole but not using the property for lettings, either using it purely as a second home, or simply leaving it empty.

West Sussex homes under the spotlight

The new rules, which are set to come into force in April 2023, will mean those hoping to register for business rates have to prove that they let their properties for at least 70 days in a year. At present they are allowed to pay business rates if they make their property ‘available for letting’ for 140 days a year but are not required to evidence the fact. In addition to proving lettings, the availability clause will remain and owners will need to prove that the house is available for 140 days a year and successfully let for 70 of those days, to access the relief.

In announcing the changes on 14th January, Mr Gove was clear that they are targeting people who take advantage of the system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Providing evidence of holiday lettings

In order to qualify for small business rates relief on holiday letting second homes the property owners will have to provide evidence as part of the application process. Evidence will consist of a mix of marketing materials such as the website or brochure used to advertise the property and letting details and receipts.

Mr Gove explained that this was not about targeting those small business owners that legitimately let second or multiple homes for holiday rentals. It is those using a loophole for purely financial gain and who enjoy the benefits of the local services without making a fair contribution.