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Year End Tax Review 2004

Capital Gains

Up to 1998, it was common to "bed and breakfast" shares just before the end of the tax year, in order to take advantage of the annual tax-free allowance for CGT. This particular plan - selling a shareholding and buying back exactly the same thing the next day - no longer works, but it is still possible to achieve the same result (at the cost of more stockbroker's commission) by switching to a different investment. On a substantial portfolio and over a period of years, this can save a great deal of tax.

The "taper relief" which was introduced to replace the old inflation allowance goes up for those assets which have been held since before 1998 on 6 April each year. If you are thinking of realising some investments, it may be best to wait until then - and you'll pay any tax a whole year later,
as well.

Taper relief is much more generous for "business assets" than it is for "investments". From 6 April 2004, property let to an unincorporated trader - such as a sole trader running a shop - will qualify for business assets taper in the hands of the landlord. The trouble is that the previous years of non-business ownership up to April 2004 will still only entitle you to the lower rate of relief. If you own that sort of property, it will be worth looking at ways to get the full benefit of the higher taper rate from an earlier date, which may involve transferring the asset to a trust. This may be a complicated procedure, but the savings can be considerable.