Capital Gains Tax
Understanding how tax affects your investment profits
Why Capital Gains Tax Matters
When you sell an investment for more than you paid, you make a capital gain. In the UK, you pay Capital Gains Tax (CGT) on profits above your annual allowance. Understanding CGT helps you keep more of your investment returns and plan tax-efficient strategies.
Smart investors use ISAs, pension contributions, and timing strategies to minimize their tax bill legally. Every pound saved in tax is a pound that keeps growing in your portfolio.
How Capital Gains Tax Works
Annual Allowance: You can make up to £6,000 in capital gains per year (2023/24) tax-free. Gains above this are taxed.
Tax Rates: Basic rate taxpayers pay 10% CGT on most assets (18% on property). Higher rate taxpayers pay 20% (28% on property).
ISA Protection: Investments held in ISAs are completely exempt from CGT. You can invest up to £20,000 per year in ISAs.
Timing Strategy: You can spread sales across tax years to use multiple annual allowances and reduce your tax bill.
The Cost of Ignoring CGT
Here's how Capital Gains Tax affects your investment profits:
| Scenario | Investment Gain | CGT Paid | Net Profit |
|---|---|---|---|
| No Planning (Higher Rate) | £50,000 | £8,800 | £41,200 |
| Using ISA Allowance | £50,000 | £0 | £50,000 |
| Spread Over 2 Years | £50,000 | £5,200 | £44,800 |
Tax-efficient planning saves you £3,600 to £8,800 on a £50,000 gain!
Why This Matters to You
Understanding Capital Gains Tax helps you keep more of your investment profits. By using ISAs, timing your sales strategically, and planning ahead, you can legally reduce your tax bill by thousands of pounds every year.
Our tax specialists help you create a tax-efficient investment strategy that maximizes your after-tax returns. We'll show you how to use ISAs, pensions, and timing strategies to minimize CGT legally.
Important Investment Warning
This content is for educational purposes only and does not constitute financial advice. We are not FCA-regulated financial advisers. Investments can go down as well as up, and you may lose some or all of your capital. Past performance does not guarantee future results.