Tax Planning Before the Year End – Part 2

12th February 2021

The end of the 2020/21 tax year is less than two months away and now may be the opportune time to consider what steps can be taken to reduce your tax exposure for the year.

This is the second is our series of Tax Planning Advice.

Capital Gains Tax Planning

Using the Annual Exemption

Each individual has an annual exemption for the year of £12,300. If this is unused in a tax year it is not carried forward, instead it is lost.

So if you are considering selling assets in the short term you may wish to bear this is mind. It may be worth staggering any disposals where possible over a number of tax years to ensure you use all the annual exemptions available.

Transfer of Assets between Spouses

These transfers are usually free of tax and they can be an effective tax planning tool.

For instance if one spouse is going to make a chargeable disposal, they can obtain an additional annual exemption which will reduce the overall chargeable gain by £12,300.

Furthermore, this is a useful in ensuring that no basic rate bands are wasted. A taxpayer would wish to avoid a situation where they are paying tax at the higher rate on disposal, when their spouse has part of their basic rate band unused.

Investments in Enterprise Investments Schemes (EIS), Seed Enterprise Investment Schemes (SEIS)

If you make a disposal and reinvest the gain in EIS or SEIS shares, then all or part of the gain (depending on the type of investment) may be deferred until the EIS/SEIS investment is later sold.

Gains made on EIS/SEIS shares are exempt from capital gains tax subject to the qualifying conditions being met.

Coming up next…Inheritance Tax Planning.

Get in touch with a member of our team for help and advice. 

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