There’s a silver lining for your stock market losses

With April 5, the end of the UK tax year, fast approaching, and many investors nursing significant losses in volatile markets, now is a good time to consider what can be done to mitigate any capital gains tax (CGT) liabilities you might have.
Gains in the stock market are especially amenable to careful tax planning. Unlike assets such as property, stocks are liquid and a holding can easily be divided to maximise the tax advantage. Selling sufficient stock to realise a gain of no more than the 12,300-pound ($16,000) annual capital gains tax allowance means that there would be no CGT to pay.
Losses too can serve a purpose. If you were to realise a loss in the same tax year, it can be offset against any gain, reducing and possibly even eliminating, a tax bill. It is also possible to offset a loss up to four years after the end of the tax year that you disposed of the asset. So it’s helpful to report any capital losses even if you don’t yet have a gain to set it off against — it could be useful in the future.
The approaching financial year-end offers other opportunities to save on tax. If you stagger a sale so that you sell some shares in the current tax year and some a few days later in the new tax year (ie after April 5), a gain of up to 24,600 pounds can be realised with no tax to pay. This is because a fresh annual CGT allowance becomes available from April 6.
Married couples or civil partners can double that allowance to 49,200 pounds since they can exchange their holdings to minimise their combined CGT bill. Assets passed between such partners do not attract capital gains tax, since they’re passed on what’s called a “no gain, no loss” basis.
So, for instance, if one partner originally paid 5,000 pounds for some shares that are now worth 30,000 pounds, there is no CGT to pay if they simply transfer them to their partner.
If the receiving partner were to then sell those same shares however, CGT would be calculated using the same base cost (ie 5,000 pounds).
The advantage of transferring assets in this manner is that more than one person’s CGT allowance can be offset against any gain. This sort of exchange can be especially useful for couples who have separated during the tax year and are looking to divide their holdings.
Once a gain has been realised using your CGT allowances, future capital gains can be avoided by transferring the proceeds into more tax-efficient vehicles, such as Individual Savings Accounts (ISAs) or Self-Invested Personal Pensions (SIPPs).

—Bloomberg