How couples can minimise Capital Gains Tax together

Capital Gains Tax (CGT) is a tax on the profit you make when selling an asset that has increased in value since you acquired it. It’s important to note that CGT also applies to assets that are gifted to you, not just assets you purchase yourself. Thankfully, CGT is only charged on the gain, not the total sale amount.

The most common assets subject to CGT include second homes, stocks and shares outside of ISAs or pensions, and high-value personal possessions such as jewellery or artwork. For many couples, CGT only becomes a concern when selling these large assets.

Assets such as charity gifts, ISAs or PEPs, UK government gilts and Premium Bonds, betting, lottery or pools winnings, your car (unless used for business), and items considered to have a lifespan of less than 50 years (such as antique watches or clocks), are all exempt from a CGT charge.

Any gains relating to selling your primary residence are typically exempt from CGT.

Every UK taxpayer benefits from an annual CGT allowance, which allows you to make a certain amount of profit from the sale of an asset before paying any tax. For the 2024/25 tax year, this allowance is £3,000 per person.

By carefully planning the sale of your assets, couples can maximise their CGT allowance and significantly reduce their tax bill.

The amount of Capital Gains Tax (CGT) due depends on both your income level and the type of asset you’re selling.

• For basic-rate taxpayers, if your income plus the gain keeps you within the basic rate threshold, you’ll be taxed at 18% on gains from residential property (where the property is not your home) and 10% on other assets. However, if your gains push you into the higher-rate tax band, you may pay some CGT at both rates.
• For higher or additional-rate taxpayers, the CGT rate increases. For residential property sales (where the property is not your home), you’ll be taxed at 24% on gains above your annual allowance. Gains from other assets, such as investments or valuable possessions, will be taxed at 20%.
• For business owners, if you’re selling a trading business you’ve owned for at least two years, you might qualify for a reduced CGT rate of 10%, thanks to Business Asset Disposal Relief.

One of the most effective ways you as a couple can minimise Capital Gains Tax is by transferring or splitting assets between you. In the UK, transfers of assets between spouses and civil partners are exempt from CGT, provided they are made on an outright and unconditional basis.

This means that if one of you is likely to exceed your CGT allowance, sharing or transferring assets between you can allow you both to utilise your individual allowances. For tax year 2024/25 this will effectively give you a combined allowance of £6,000, rather than £3,000, on any profits that are subject to CGT.

While transferring assets is a key strategy, there are other ways to minimise Capital Gain Tax liability. Here are a few other options to consider:

• Staggering sales: By spreading the sale of assets over multiple tax years, you can take advantage of more than one year’s CGT allowance. For example, selling part of an investment at the end of one tax year and the remainder at the beginning of the next can effectively double your tax-free gains on that asset.
• Offsetting losses: If you’ve made losses on other investments, you may be able to offset these against your gains, reducing the amount of CGT you owe. This strategy can be particularly useful if you’ve experienced a mix of profitable and unprofitable investments.
• Using tax-efficient accounts: Moving assets into tax-efficient accounts like ISAs or pensions can shelter them from future CGT. For instance, transferring investments into an ISA allows future gains to be made tax-free, providing long-term savings.

For more on this, see 9 ways to reduce your Captial Gains Tax.

Minimising CGT is just one part of a broader tax-efficient financial plan. By considering all aspects of your finances, including income tax, inheritance tax, and investment growth, you can ensure that you’re not leaving money on the table. A comprehensive plan will help you protect your assets, achieve your long-term financial goals and ensure more of your hard-earned money stays in your pocket.

While some CGT reduction methods can be implemented relatively easily, others may be more complex, especially for couples with large or diverse portfolios. Additionally, CGT allowances can change annually, meaning what works one year might not be as effective the next and could disrupt your longer plan for selling assets.

This is why seeking professional financial advice is crucial. A financial planner can help you navigate the complexities of CGT and ensure you’re making the most of available allowances and reliefs.

At Amber River, we’re committed to helping you navigate the complexities of tax planning. Our expert advisers work with you to create a bespoke financial plan that considers all your needs, ensuring you’re on track for a secure financial future.