Spend your capital gain and pay no tax - only 170 days to go!

Posted on in Capital Gains Tax

This is a one off tax relief within the new SEIS introduced in March's Budget.

If you have recently exchanged, or expect to before the end of the tax year, eg on a buy-to-let property, and don't welcome the 28% capital gains tax bill, you could take the view that a government subsidy to encourage you to invest your gain in a new company will help you take a risk.

For example, if you sell an asset for £250,000 and make a gain of £50,000, the capital gains tax due @ 28% is £14,000.

If you risk the £50,000 (only 20% of your sale proceeds) and reinvest it in a promising qualifying company, you will save this £14,000.  Not only that, but you will receive a credit for income tax purposes of up to 50% of the gain of £25,000.

This is a total tax saving of up to £39,000 on an investment of £50,000. The net amount risked by you could therefore be only £11,000 out of your £50,000 gain.

The income tax saving will be with us for a while and is still valuable. However, the capital gains saving is with us only for this tax year.

As it isn't wise to make an investment until the Finance Bill receives Royal Assent in July, there are only approximately 170 working days left to take action to top up your income tax relief by this one off capital gains relief.

As with many tax reliefs, there are numerous conditions to check before you go ahead. You may find it is worth it.

SEIS - Seed Enterprise Investment Scheme