Most of us are aware that we can earn a certain amount of income before incurring any income tax (£9,440 2013/14).
However, fewer of us are aware that we have an annual Capital Gains Tax (CGT) exemption and as such this allowance is often underused.
CGT is a tax on the profit you make when you sell or ‘dispose of’ an asset (e.g. give it away).
CGT is payable on the gain realised, not the amount of money received, and the current rate of tax is 18% for basic rate taxpayers and 28% for higher rate taxpayers/Trustees.
The annual CGT exemption is currently £10,900 (2013/14), which means that individuals can realise gains up to this limit without having to pay tax. For a married couple, gains of up to £21,800 can be realised before tax is payable.
In addition, where losses have been realised in previous years, these may be carried forward and offset against future gains.
Most of us are aware of the benefits of using tax free savings vehicles such as Cash ISAs, Investments ISAs and certain National Savings & Investments (NS&I) products.
However, once these allowances have been utilised, the CGT exemption is a very useful tool in reducing the tax payable on your hard earned savings and investments.
By carefully structuring your portfolio, utilising a range of investments and tax wrappers, Springfield Financial Services Ltd can legitimately minimise the amount of tax payable on your investments, preserving your wealth for the future.
Contact our Chartered Financial Planners for a review of your investments and advice on how to maximise the tax efficiency of your portfolio.