Capital gains tax, explained

The Nutmeg team

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Capital gains tax (or CGT) is a tax on any profits or gains you make when you sell or dispose of an asset. Be it a painting, an antique, shares or bonds, there are a few rules you should know.   

What are the rules for this tax year? 

In the current tax year (6th April 2021 to 5th April 2022), you can realise capital gains of up to £12,300 without having to pay capital gains tax. If your gains rise above this threshold – assuming your investments are outside an ISA or you have no losses to offset – you’ll have to pay. The rate of tax on gains over the exempt amount is 10% or 20%, depending on your taxable income. 

Capital gains tax applies to the following: 

If your only  substantial investments are in an ISA or pension, you may not have  to worry about capital gains tax. If you have other assets, perhaps company shares, a second home or artworks, you should pay close attention to your yearly allowance.   

It may be worth spreading  the disposal of large assets over different tax years to stay within the threshold.  

If you have a spouse or civil partner, you can give assets to them without incurring capital gains tax,  providing some conditions are met.  That means  they can effectively share their capital gains tax allowance with you.   

How can Nutmeg help me? 

First, any returns in a Nutmeg stocks and shares ISA or pension fall outside of your £12,300 annual capital gains allowance.  

If you don’t have an ISA already, you may be paying more capital gains tax than you necessarily need to. Anything you contribute to an ISA, up to the annual allowance of £20,000 in the 2021/22 tax year, is exempt.  

At Nutmeg, we want to help you build a clear picture of what you owe and what you’re owed.   

At the end of each tax year, we’ll supply you with a tax statement for any capital gains tax that you may be due to pay. If you don’t receive a capital gains report, this is because your gains are contained within a tax wrapper – in this case an ISA or pension – and not subject to capital gains tax.  

Risk warning   

 As with all investing, your capital is at risk.  The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Tax treatment depends on your individual circumstances and may be subject to change in the future.   

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The Nutmeg team
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