7 Key Considerations for Capital Gains Tax (CGT) Planning Before Tax Year-End

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As we approach the end of the tax year on 5th April 2025, it’s a great time to review your investments and consider whether any action should be taken to manage your Capital Gains Tax (CGT) liability.

CGT is payable when you sell or dispose of certain assets (such as shares, property, or funds) for more than you originally paid for them. The tax is charged on the profit (or ‘gain’) you’ve made. However, there are allowances and strategies that can help reduce or even eliminate your CGT bill. 

Here are seven key points to consider as part of your tax-year-end planning: 

1. Make Use of Your CGT Allowance

Each individual has a CGT annual exemption, which allows you to realise a certain amount of gains before any tax is due. For the 2024/25 tax year, this allowance is £3,000.00 per person.

For example, if you bought shares for £5,000 and sold them for £8,000, your gain would be £3,000, which falls within your tax-free allowance. If you haven’t yet used this allowance, you might consider selling assets before 5th April to make the most of it.

However, unused allowances cannot be carried forward to future years, so it’s a case of ‘use it or lose it’. 

2. Offset Gains with Losses

If you have investments that have fallen in value, you could sell them to realise a loss, which can be used to reduce the CGT owed on other gains.

For example, if you made a gain of £5,000 on one investment but a loss of £2,000 on another, your net taxable gain would be £3,000—keeping you within the annual exemption and avoiding a tax bill.

Losses must be reported to HMRC and can be carried forward indefinitely to offset future gains. If you have losses from previous years that haven’t been used, now could be a good time to factor them into your CGT planning.

3. Be Aware of the 30-Day Rule on Shares

If you sell shares to realise a gain, you might want to repurchase them shortly after. However, HMRC’s 30-day rule means that if you buy back the same shares within 30 days, the sale will not be treated as a CGT disposal in the usual way, which could impact your ability to use your annual exemption.

To avoid this, you could:

   •       Wait more than 30 days before repurchasing the shares.

   •       Invest in a similar but not identical asset (for example, a different fund with similar exposure).

   •       Use a spouse or partner’s name to buy back the shares.

This is particularly relevant if you frequently buy and sell investments and need to manage your CGT exposure carefully.

4. Use a ‘Bed and ISA’ Strategy 

If you want to realise a gain to use your CGT allowance but don’t want to be out of the market, you could use a strategy known as ‘Bed and ISA’.

This involves:

     1.    Selling an investment to realise a gain.

     2.    Immediately repurchasing the same investment within an ISA.

The benefit of this approach is that while you trigger a taxable gain (which could be covered by your CGT exemption), the new investment is now held within an ISA, where any future gains or income will be completely tax-free

This is a good way to move investments into a tax-efficient wrapper while staying invested in the market.

5. Consider Transferring Assets to a Spouse

If you are married or in a civil partnership, you can transfer assets between yourselves without triggering CGT.

This means that if one partner has already used their £3,000 CGT exemption but the other hasn’t, transferring an asset before selling it could help double the tax-free amount.

For example:

   •       If you hold shares with a £6,000 gain and transfer half to your spouse, you can each realise £3,000 tax-free before 5th April, avoiding CGT entirely.

This strategy may be even more effective when one spouse is a lower-rate taxpayer, as any gains above the CGT exemption would then be taxed at a lower rate than your own. However caution must be taken regarding this approach as any new investment from the proceeds may need to be made in the spouses name to avoid breaching HMRC reinvestment rules.

6. Consider Deferring a Sale Until After 5th April

The timing of when you sell an asset matters. If your gains exceed your annual exemption and you have already made significant disposals in this tax year, it may be beneficial to wait until after 5th April 2025 to push the gain into the next tax year, when a new CGT allowance is available.

However, tax rules and allowances may change in the future, so delaying isn’t always the best option.

7. Keep Good Records to Make Reporting Easier

To calculate your CGT bill accurately, you’ll need records of:

Purchase and sale prices of your investments.

Income, details of how any dividend/interest income has been accounted for i.e. purchase of additional units.

Transaction costs, such as broker fees and stamp duty.

Any previous losses that can be carried forward.

These records will help ensure you’re paying the right amount of tax and can provide evidence if HMRC ever queries your CGT calculations.

Final Thoughts

With careful planning before the tax year ends, you can make the most of your CGT allowance and potentially reduce your tax bill.

If you’re unsure about the best approach for your situation, seeking professional financial advice is highly recommended. A financial adviser can help you structure your investments in the most tax-efficient way and ensure you’re taking advantage of all available reliefs.

The key takeaway? Don’t leave it too late, review your CGT position before 5th April to make the most of the allowances available.