For example, generally investors should not hold a poor investment simply because of the tax implications.
The capital gains tax allowance is £11,300 meaning a married couple (or those in a registered civil partnership) can make gains of £22,600 a year without any charge to tax.
Offset losses against gains If an investment is sold at a loss, the loss can be offset against any gains made in the same tax year. If there are more losses than gains, these can be registered on a tax return and carried forward to offset against future gains.
Sell when tax is paid at a lower rate The rate of capital gains tax is now charged based on the rate of income tax paid. If taxable income will fall in the future, perhaps due to retirement, consider delaying selling until then.
Transfer to spouse and pay less tax
Married couples (or those in a registered civil partnership) are able to transfer investments between them without usually incurring Capital Gains Tax. Doing this before selling an investment can save tax if one spouse or partner pays tax at a lower rate than the other (or has unused Capital Gains Tax allowance).
Reduce taxable income
As capital gains tax is linked to the rate of income tax paid, reducing taxable income could also reduce the amount of capital gains tax paid. One of the easiest ways to do this is to fully use tax shelters such as an ISA – income from an ISA is free from UK tax. In some cases taxable income for a particular year could be reduced – perhaps by transferring income-bearing assets such as cash deposits to a lower earning spouse.
Use pensions to reduce capital gains tax
If you would otherwise pay higher rate tax a pension contribution could also be used to reduce a capital gains tax liability and receive tax relief on the contribution. Effectively the basic rate tax band is increased by the amount of the pension contribution, meaning larger gains might be realised before the higher rate of capital gains tax is payable. For example, a pension contribution of £3,600 could extend the basic rate threshold from £33,500 to £37,100 meaning higher rate tax is not paid until income is above £48,600 (£37,100 plus personal allowance of £11,500). Then, providing taxable income and gains are less than £48,600 in this tax year, capital gains tax will be paid at 10% and none at 20%.