With falls in the stock market often spooking investors, clients sitting on capital losses can make use of these to reduce any future gains, without coming out of the market. Here's how:
- Selling shares and buying them back within 30 days is not treated as a disposal and therefore wouldn’t create a loss. Similarly, gifting shares to a spouse or civil partner would not be treated as a disposal for capital gains tax purposes, but there are ways to trigger a loss and stay in the market.
- Clients can sell shares and buy them back in an ISA or pension, sell shares and the client’s spouse/ civil partner buys them back or sell shares and buy shares in a different company or fund within a Wrapper.
- If you have shares or investments that have reduced significantly in value since you bought them, you may want to take advice on how best to utilize those losses to reduce future capital gains tax bills.
- Clients can also reclaim overpaid inheritance tax, if the executor sells any qualifying investments at a lower value within 12 months of the death they can reclaim inheritance tax paid on any loss.
- If some of the investments in the estate have increased in value, one option open to the executors is to assign these direct to the beneficiaries and only sell the investments that have fallen in value to maximise the amount of IHT that can be reclaimed.
- Anyone considering making gifts in order to reduce their potential IHT bill may want to take advantage of recent falls in the market and freeze the value of the gift at today’s prices, in the knowledge that any future growth
Falls in the market can present opportunities for tax planning to reduce tax on future gains so it is best to receive advice from a Financial Adviser.
