Capital gain tax is the tax on the profit made from selling, disposing, transferring or gifting a non-inventory asset like shares, bonds, property, and antiques. This means you only have to pay tax on the profit gained and not on the whole amount of money you received for the assets. And, to avoid this tax, there are certain rules that you can apply.

Use capital gain tax allowance

Government has set an annual capital gain tax allowance for every individual which currently is £11,000. Investment up to that range is free of tax and excess gain is liable for 18% or 28% depending on the gain amount.

Settle losses with gains

It is not always you gain profits because sometimes you incur losses too. Your profit can cover the losses incurred. Likewise, while calculating net gain, capital losses are deducted from capital gains which decrease your tax bill. Losses of the same year or up to four years ago can help you bring down your tax liability. In order to verify those losses, it must be registered with HMRC within four years from the year in which the loss has incurred.

Transfer assets to spouse

As transferring or gifting assets between spouses or civil partner is tax free, make sure to take advantage of both annual capital gain tax allowances. Because doing this doubles the allowance for married couples and civil partners.

Investment in ISA

Opening Individual Savings Account (ISA) in cash, stocks or shares can be a real investment. This is because the gains you make from these accounts are free from Capital Gains Tax. Hence, you should ensure to invest in the ISA to save your tax money from the taxman.

Pension contribution

When you make a contribution to a pension, you can reduce the tax on capital gains from 28% to 18%. Your contribution extends the upper limit of tax band which lowers the burden of tax.

Investment in EIS

Enterprise investment scheme offers capital gains tax reliefs to investors who subscribe for shares in small qualifying companies. The benefits of this scheme are 30% upfront tax relief up to maximum investment of £1 million, tax relief from investment losses and capital gains tax deferral for the life of the investment.