Your clients need to use their annual exemption or lose it, as James Badcock, partner for Collyer Bristow, points out.
He explains: “Individuals with portfolios of investments will wish to ensure they use their annual exempt amount each year.
“Spouses should ensure they use both their exempt amounts, which may involve reallocating investments between spouses, bearing in mind assets can be transferred from one spouse to another free of tax.”
When it comes to a sale, Sue Moore, technical manager for private client in the tax faculty of the Institute of Chartered Accountants in England and Wales, says it could be worth your client’s while to “split the sale of the asset over two tax years to get the annual allowance and lower-rate tax bands”.
Furthermore, as Mr Badcock points out, “Losses can be set against gains, and unused losses carried forward to be used in future years, as long as HM Revenue & Customs has been notified of the loss within a certain time limit”.
What a relief!
Many investments are not subject to capital gains tax, such as Isas - from which there are now six different flavours for your clients to choose - pensions and certain insurance wrappers.
Scott Gallacher, director with Rowley Turton, says for those individuals with share or investment portfolios, it could be worth making yearly changes.
He explains: “People should look to buy and sell investments each year to trigger gains up to the CGT allowance. This effectively rebases the purchase cost and prevents portfolios becoming pregnant with gain.”
But even if clients do not wish to carry out annual turnover to their portfolios to avoid triggering CGT, there are many reliefs available with certain investments and assets, as Mr Badcock explains:
Your client’s home
■ Principal private residence relief is an important relief for someone’s main home. Where a property has not always been used as a home, or where a client may own more than one, care should be taken about the amount of relief available. Non-UK resident individuals may only claim relief for a home they use in the UK if they spend at least 90 nights a year here.
■ Enterprise investment schemes (EIS) are efficient in mitigating CGT, because there is no CGT payable on disposal of qualifying shares. Also, if a gain has arisen on another asset, but the proceeds are invested in qualifying shares, CGT may be deferred.
Ms Moore adds that Seed EIS (SEIS) can relieve up to 50 per cent of the gain and defer the balance.
■ Entrepreneur’s relief. According to Mr Badcock: “This allows the rate of CGT on the disposal of business assets to be reduced to 10 per cent, up to £10m worth of gains during a person’s lifetime.