The Autumn Statement 2022 announced changes to several tax rates, including a reduction in CGT Allowances and Dividend Allowances. As a result, many more people will be liable to report and pay tax on CGT and dividends from 6th April 2023. Our personal tax experts give their advice on how you can prepare for the changes.
The planned changes to CGT Allowance and Dividend Allowance will result in significantly more people being required by law to report and pay tax. With both allowances set to decrease on 6th April 2023 and then again on 6th April 2024, timing is essential to optimise the higher rates and reduce your tax liabilities.
What are the allowances for capital gains tax and dividends?
The table shows the current allowances for CGT and dividends, alongside the new allowances that have been announced by the Government for April 2023 and 2024.
| 2022/23 | 2023/24 (From 6th April 2023) | 2024/25 (From 6th April 2024) | |
| CGT Allowances | £12,300 | £6,000 | £3,000 |
| Dividend Allowances | £2,000 | £1,000 | £500 |
CGT reporting requirements
Even if you are exempt from paying CGT because your capital gains fall within the new annual exemption, reporting requirements state that you should still disclose capital gains on a tax return if the proceeds received in a year exceed four times the annual exemption amount.
From April 2023, this means anyone with capital disposals that total £24,000 or more will need to complete tax returns; from April 2024, the proceeds limit will drop to £12,000.
If you are currently protected from reporting requirements, it is vital to make sure that you will remain exempt after the CGT allowances change or that you meet any reporting requirements moving forward if your capital gains or proceeds exceed these thresholds.
How capital gains tax is calculated
CGT taxes the profit you make when selling an asset that has increased in value. Some assets are exempt from CGT, while others (known as ‘chargeable assets’) are not.
You can work out your taxable total for the year by calculating the gain for each individual asset and adding them together, then deducting any allowable losses.
How dividend tax is calculated
The amount of tax you pay on your dividends depends on your Income Tax band. You can work out the tax band that applies to you by adding your total dividend income to any other income you receive.
| Income Tax band | Tax rate on dividends that exceed the allowance |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Act now
There is still time to make the most of this year’s CGT Allowance and Dividend Allowance before the end of the 2022/23 tax year.
If you are looking to sell a property before 5th April 2023 ahead of the reduction to the CGT Annual Exemption, you should ensure that the 60 day reporting requirements in respect of capital gains on UK property are reviewed and met if required.
These rules may require a CGT Return to be submitted and the CGT liability on any capital gain to be paid within 60 days of the completion of the sale.
It is important to note that people who utilise their annual exemptions within share portfolios may need specialist support from a financial planner to navigate the CGT allowance changes and dividend allowance reduction.
For further help and advice on timing your transactions to maximise your CGT Allowances and Dividend Allowances, contact us today to speak to one of our personal tax experts.
