Capital Gains Tax exemption cut to £6k

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The Chancellor plans to halve the capital gains tax exemption to £6,000 from the new tax year

The tax free allowance for capital gains tax (CGT) will reduce in 2023-24 from £12,300 to £6,000 and again to £3,000 in 2024-25.

The measure is expected to raise £420m in 2024-25, rising to £855m by 2027-28. 

While the CGT exemption change will raise several billion pounds over the next six years, it will also raise the administrative burden for smaller shareholders and will put a squeeze on the buy to let market as landlords face an increasing tax burden.  

Blick Rothenberg global mobility director Robert Salter said: ‘The planned reduction of the capital gains tax allowance – presently £12,300 per annum to £3,000 over the next two UK tax years – is very unwelcome.

‘It punishes, for example, the smallest shareholders (those who literally buy and sell very small shareholdings each year) and will also increase the pressure on HMRC, in that more people will now be required to complete a tax return annually.’

The announcement sees the capital gains tax annual exemption cut to the lowest level since 1996.

Rachel McEleney, associate tax director at Deloitte, said: ‘The CGT annual exemption for individuals will be reduced from £12,300 to £6,000 from 6 April 2023, its lowest level since 1996. It will then be reduced further to £3,000 from 6 April 2024.

‘This will increase the CGT liabilities of affected individuals by up to £1,764 and £2,604 in 2023/24 and 2024/25, respectively. This measure is expected to raise £1.6bn over the next five years.’

The CGT change will affect a limited number of taxpayers.

‘Tinkering with the capital gains tax exemptions will only penalise a minority of taxpayers but is still set to reap significant sums for the Treasury, which will which is why these measures have been swooped on. It means investors who hold money in funds or shares outside a pension or an ISA will face a greater tax burden,’ said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.