Capital Gains Tax on investments highest in 20 years

If you have made gains on your investments recently, your Capital Gains Tax (CGT) bill may be considerably higher than in previous years.

Rates are now the highest they have been in two decades, with a staggering 46 per cent increase in CGT collected at the end of 2024 compared to the year before.

Investment giant, Hargreaves Lansdown, recently reported that investors would be paying almost three times more in CGT compared to 2005.

According to the same article, shrinking allowances and rising tax rates are to blame for this increase.

The annual CGT exemption has been slashed from £12,300 to just £3,000, and the higher rate of CGT has jumped from 20 per cent to 24 per cent.

That means a much larger slice of your profits could now be heading to HMRC.

But there are ways to reduce your exposure.

One of the most effective is to use a tax-efficient wrapper like a Stocks and Shares ISA or a Self-Invested Personal Pension (SIPP).

Inside these accounts, your investments grow free from Capital Gains and Dividend Tax.

You can even move existing shares into an ISA or SIPP using what is called a ‘Bed & ISA’ or ‘Bed & SIPP’.

This involves selling shares in a taxable account, moving the cash, and rebuying them within the tax-efficient wrapper.

Of course, selling shares may trigger a CGT bill, so timing matters.

It is also worth being aware of any fees or dealing charges involved.

If you are worried about your growing tax liability, taking control of your CGT position could make a big difference.

Looking to reduce your CGT bill? Speak to a financial adviser and explore your options.