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5 ways to improve your capital gains tax efficiency

Five ways to improve your capital gains tax efficiency

The New Year has not been kind to Boris Johnson's tax bill.

In January 2015 it emerged that the United States government had forced the mayor of London to pay capital gains tax (CGT) on the profit he made from the sale of his million-pound Islington house in 2009.

Why was this?

Because Johnson is a US citizen, he has to comply with American tax laws irrespective of his country of residence (the US and Eritrea are the only 2 countries that tax according to citizenship). This means that he has to file separate tax returns in the US and the UK, and pay CGT to both countries.

We certainly don't envy him.

The chances are you're not going to have to deal with the sort of tax-related complications as Boris Johnson. However, that doesn't mean that you can't take measures to reduce your exposure to CGT.

We've put together 5 tips to get you on the road to CGT efficiency (sorry Boris, these may not help you with your US tax return).

Five tips for CGT planning


Use your CGT allowance

There is an annual CGT allowance that lets you make a certain amount of gains free of tax. The limit for the 2014/15 tax year is £11,000 and will increase to £11,100 from April 2015. Any unused allowance cannot be rolled over into the next tax year, so make the most of it and use as much as you can.

Utilise your ISA allowance

All capital gains made from stocks, shares and cash inside an individual savings account (ISA) are CGT-free. The current annual savings limit is £15,000 and will increase to £15,240 in April 2015.

Get involved with the Enterprise Investment Scheme (EIS)

You won't have to pay CGT on gains made from EIS shares held for more than 3 years.  Although investing in start-ups and small firms can make a difference to your CGT bill, it carries a high degree of risk and may not be suitable for inexperienced investors. Contact us for more on the EIS.

Give assets to charity

You can give or sell property, land and shares to a charity without incurring CGT. However, the assets must be sold at less than the market value to qualify for CGT exemption.

Make a gift to your partner

You won't be charged CGT on assets you give to your spouse or civil partner. Transferring assets between you and your partner allows you to use both annual CGT allowances, essentially doubling the allowance.

Get in touch

We can help you reduce your CGT liability. Fill out our contact form, call us on 01628 631 056 or email geoffk@knightandcompany.co.uk to discuss our personal tax planning service.