Asset Disposal Planning Before 6 April 2024

If you’ve been considering disposing of assets in your business, the deadline of 6 April 2024 presents a genuine opportunity to optimise your tax position. Whether you’re a sole trader, partnership, or limited company, the timing of asset sales can have a meaningful impact on your corporation tax, capital gains tax (CGT), or income tax liability. Here at Severn Accounting, we’ve seen many business owners miss out on valuable tax-saving opportunities simply because they didn’t plan their disposals strategically. Let’s explore why this deadline matters and what you should be doing now.

Understanding Capital Gains Tax Relief

One of the primary reasons to consider disposing of assets before the end of the tax year is to utilise your capital gains tax annual exemption. For the 2023/24 tax year, individuals have a CGT exemption of £3,000. This means you can realise gains up to this threshold without paying any CGT. If you’ve been sitting on an asset with a modest gain, disposing of it before 6 April allows you to bank that relief.

It’s equally important to note that CGT rates have increased in recent years. Basic rate taxpayers pay 10% on gains (20% for residential property), whilst higher rate taxpayers face 20% (40% on residential property). If you’re expecting a significant change in your income next tax year—perhaps you’re retiring or scaling back—disposing now whilst you’re in a lower tax bracket could prove significantly cheaper.

Losses and Carry-Forward Benefits

Perhaps less talked about, but equally valuable, is the opportunity to crystallise losses before the year-end. If you have assets that have fallen in value, selling them before 6 April 2024 allows you to recognise those losses in the current tax year. These losses can be set against other gains in 2023/24, and any remaining loss can be carried forward indefinitely to offset future gains.

This strategy, known as “loss harvesting,” is particularly relevant if you’ve had a profitable year and expect to realise gains elsewhere. By offsetting losses against those gains, you could significantly reduce your overall CGT liability. For limited companies, the rules are similar—losses can be carried forward to offset future profits.

Timing Considerations for Limited Companies

If you operate as a limited company, corporation tax at 25% applies to gains (for profits over £250,000). However, companies can claim capital allowances and depreciation on certain assets, which can defer or reduce the taxable gain. By disposing of assets in the current financial year, you can claim these reliefs and manage your profit position more effectively.

Additionally, if your company has carried forward losses or hasn’t utilised relief schemes such as Capital Allowances on Plant and Machinery, disposing before 6 April gives you the chance to align this with your overall tax planning. We recommend reviewing your fixed asset register now to identify which assets might be worth selling.

Practical Steps to Take Now

Time is running out—you’ve got until 6 April to complete any disposals for them to fall within this tax year. Here’s what you should be doing:

Review your asset register. List all assets that might be candidates for disposal—vehicles, machinery, property, investments, or goodwill.

Calculate the gain or loss. Work out the acquisition cost versus the likely sale price to understand the tax impact.

Explore alternative buyers. Sometimes, related parties (family members or other businesses you own) might be interested. Just ensure these transactions reflect fair market value—HMRC scrutinises related-party deals.

Consider your cash flow. Don’t dispose of assets simply for tax reasons if it damages your business operations. Tax planning should complement your business strategy, not drive it.

Document everything. Keep comprehensive records of the sale price, costs, and the acquisition date. HMRC will ask for this if you’re ever queried.

Looking Ahead to April 2024

After 6 April, any gains you realise will fall into the 2024/25 tax year, meaning you’ll lose this year’s annual exemption and won’t be able to set losses against this year’s profits. The sooner you act, the better.

Tax planning isn’t about being clever—it’s about being organised and deliberate. If you’re uncertain about which assets to dispose of, or how the tax rules apply to your specific situation, now is the time to seek guidance.

For tailored advice, contact Severn Accounting—we’re here to help.