Capital Gains Tax changes in 2023
As part of last November’s Autumn Statement, Chancellor Jeremy Hunt announced a reduction in the threshold of Capital Gains Tax. From 6th April 2023, the claimable allowance fell from £12,300 to £6,000 – with a further drop to £3,000 from April 2024.
What is Capital Gains Tax?
Capital Gains Tax is a levy paid on profits or gains made when someone disposes of or sells assets like property or shares in companies. Prior to the changes, the first £12.3k of capital gains was exempt from tax.
Limits on reported proceeds and for trustees
In addition to the reduction of the claimable allowance, a ‘proceeds reporting limit’ was introduced, that limitation being £50,000.
The rates for trustees of settlements are less than those for individuals and personal representatives stated above. From 2023-2024, the annual exempt amount for trusts is £3,000, reducing to £1,500 from 2024-2025.
How could this affect companies or individuals?
The reduction in the Capital Gains Tax threshold is designed to create a fairer tax system, bringing the treatment of earned and unearned income closer together.
If you’re a limited company director, you could encounter these changes if you’re applying for a Members Voluntary Liquidation (MVL). An MVL is a process that allows directors of a solvent limited company to close the company in an orderly manner. Directors could choose to do so if the business has run its course or if they plan to retire without a successor.
More about Members Voluntary Liquidations (MVLs)One of an MVL’s benefits is its reduction in the amount of tax, including Capital Gains Tax, that directors will have to pay, and allowing them to claim Business Asset Disposal Relief. An increase in the amount of tax you’ll pay after the incoming changes could reduce an MVL’s benefits.
If you’re a limited company director and are considering an MVL, to reduce the risk these changes to Capital Gains Tax might have on the process, you should speak to us as soon as possible and get the ball rolling before the changes come into effect.
Summary
In 2022, Chancellor Jeremy Hunt announced a reduction of the threshold of Capital Gains Tax. The claimable allowance fell from £12,300 to £6,000 from April 2023 and will fall to £3,000 from April 2024. This deduction could reduce the benefits offered by a Members Voluntary Liquidation (MVL). Directors interested in liquidating a solvent limited company that’s come to the end of its useful life should speak to us for advice on applying for an MVL. We can offer free, impartial advice with no obligation.