The UK government has recently announced its plan to lower the capital gains allowance. This reduction, which will take effect in April 2023, will entail a significant impact on all investors as it will be reduced from £12,300 to £6,000 for the 2023/24 tax year and then further reduced to £3,000 in 2024/25.

In light of this development, it is essential for investors to consider maximising their £12,300 taxable allowance this year before it is reduced, next year.

Led by Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt, the reduction of the UK Capital Gains Tax Allowance is part of the government’s effort to reduce debt servicing costs and allocate more funds for public services. As described by the government, the capital gains annual exempt amount, which has remained unchanged for several years, is “generous”, and reducing it will be part of the measures to restore the public finances. Along with the plan to halve the dividend allowance, the reduction is projected to raise over £1.2billion a year from April 2025. 

Ultimately, while the reduction will result in a substantial tax increase, the UK government has not raised headline rates of taxation, as noted by Hunt in his statement to the House of Commons. As such, investors must consider this development and plan accordingly to maximise their taxable allowance before the reduction takes effect.

The UK government’s plan to reduce the capital gains allowance will have a significant impact on investors, lowering it from £12,300 to £6,000 in 2023/24 and to £3,000 in 2024/25. This move is part of the government’s efforts to reduce debt servicing costs and allocate more funds for public services. While the reduction will result in a substantial tax increase, the government has not raised headline rates of taxation.

Investors must plan accordingly to maximise their taxable allowance before the reduction takes effect.