No significant changes have been made to the system of capital gains tax (CGT) in 2015/16 so:
- gains (after deduction of an annual exemption) are added to income to determine the rate of CGT
- Entrepreneurs' Relief (ER) gives a 10% tax rate on the first £10 million of qualifying business gains, for each individual over their lifetime
- an 18% rate applies to other gains to the extent that they fall within the basic rate band and 28% rate applies to remaining gains.
The first £11,100 of gains are CGT free being covered by the annual exemption. Each spouse has their own annual exemption, as indeed do children. A transfer of assets between spouses may enable them to utilise their annual exemptions. Consider selling assets standing at a gain before the end of the tax year to use the annual exemption. Bed and breakfasting (sale and repurchase) of shares is no longer tax effective but there are two variants which still work:
- sale by one spouse and a purchase by the other
- sale followed by repurchase via an Individual Savings Account.
These techniques may also be used to establish a loss that can be set against any gains.
A capital loss can be claimed on an asset that is virtually worthless. Where the asset is of 'negligible value' by 5 April 2016 the capital loss can be used in 2015/16. There is no need to claim for the loss in the year in which the asset has become of negligible value - if substantial gains are going to be realised in a future tax year, the claim can be delayed until the tax year in which the gains are made.