Money tip #63 to #66 – How to realise capital gains without paying tax

I orginally wrote this article when there when people were worried about the likelihood of a capital gains tax (CGT) hike in the emergency budget. However, this is still as relevant now as it was then as people are always looking for ways of realising gains without paying tax. There are a number of ways to do this and some even allow you to leave your investment holdings fundamentally unchanged.

Tips for avoiding capital gains tax

1. Use you CGT allowance – see my post Money tip #55 – Use your annual CGT allowance
2. Transfer assets to your spouse (husband, wife, or civil partner) and use their CGT allowance (Money tip #63) - Transfers between spouses are not taxed, and you both get an annual CGT allowance. This means you can transfer enough of your assets to your husband or wife for him or her to sell to use up their own allowance. This effectively doubles the CGT allowance for married couples.
3. Bed-and-spousing (Money tip #64) - In the old days you could sell shares on which you’d made a gain to use up some of your CGT allowance, and then the very next day you’d buy back shares in the same company. This was called bed and breakfasting, but it is no longer possible. Under current legislation you can’t buy back the same shares you sold within 30 days if you want to crystalise a capital gain.. However, your spouse can buy shares in the company you sold. So what you can do is you sell an investment to realise the capital gain – taking into account your annual allowance, of course – and then your partner repurchases the same assets in their own trading account. This way you keep the assets in the family, essentially keeping you portfolio intact, but you’ve defused the gain.
4. Bed-and-ISA-ing (Money tip # 65) - This is the same idea as bed-and-spousing, but this time you re-buy within an ISA. (see my post Money tip #22 – Use your annual ISA allowance for more information on ISAs). Purchasing back the same assets in an ISA doesn’t violate the 30-day rule.
5. Remember to carry forward any past capital losses (Money tip #66) - If you make an overall capital loss in a tax year year, you should note it on your Self Assessment tax return. Importantly, capital losses which you have declared can be carried forward and used to reduce your capital gains in future tax years. So reducing your potential CGT bill.
6. Tax-free gains on your second home  - it is possible to sell a second property without paying tax. MPs have been doing it for years. I explain how in my artcile sell your second home tax free like an MP.