Page 8 - Budget Newsletter - March 2023

CGT

CGT is another investment tax which, last November, attracted the Chancellor’s attention as a
source of additional revenue. The changes he announced in the Autumn Statement came as
something of a surprise. Just about a year previously, the then Chancellor, Rishi Sunak, had
dismissed similar looking proposals from the Office of Tax Simplification (OTS) to reform CGT.

Gains are currently taxed as the top slice of income, but the rates are lower than those that apply to
income not covered by allowances. Gains are generally taxable at 10% to the extent they fall in the
basic rate band (£37,700 in 2022/23 through to 2027/28) and 20% to the extent they fall into the
higher or additional rate bands. An additional 8% applies to gains on residential property and
carried interest.

The current tax rates and 2022/23 annual CGT exemption meant that, if you could arrange for your
investment returns to be delivered in the form of capital gains rather than income, you could often
pay no tax on your profits. That picture will change from 2023/24 when the annual exempt amount
for capital gains falls from £12,300 to £6,000 before another cut for 2024/25 onwards to £3,000.

Planning Point

If you do not use your £12,300 annual exemption by Wednesday 5 April 2023, you will lose it and
a possible tax saving of over £3,400. If you have gains of over the exempt amount to realise, it
could be worth deferring the excess until 6 April or later to gain another annual exemption and
defer the CGT bill until 31 January 2025. However, remember that the annual exemption will
more than halve for 2023/24 and that CGT on residential property gains (e.g. buy-to-let) is
payable within 60 days of completion.

Individual Savings Accounts (ISAs)

The annual ISA investment limit for 2023/24 will remain at £20,000 where it was set for 2017/18.
There will be no change in the £4,000 limit for the LISA, which was launched in April 2017 to
encourage savings by the under-40s. The limit for the Junior ISA (JISA) is also unaltered, at £9,000,
as is the Child Trust Fund (CTF) limit.

ISAs have long been one of the simplest ways to save tax, with nothing to report or claim on your
tax return. The arrival of the LISA complicated matters, as it sits somewhere between the traditional
ISA and a pension plan. If you are thinking of a LISA instead of either of these, you would be well
advised to seek advice before taking any action.

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