CGT Hike Looming?

The Sword of Damocles hanging over UK investors is the continued threat of hikes in capital gains tax (“CGT”) rates.

The rates of capital gains tax are currently very competitive, with CGT charges at 10% or 20% on most gains except for residential property gains (and carried interest received by private equity investors) which is charged at 18% or 28%.

Changes had been expected in the most recent Budget on 3 March 2021, but none were announced in what was an uneventful Budget from a tax point of view as it focused on providing support for jobs and businesses during the pandemic.

Six months later the financial landscape in the UK is quite different and with the recently announced hike in national insurance contributions the Government have made their intentions clear.

It is therefore much more likely that changes to the capital gains tax rates could be introduced, perhaps being announced by the Chancellor in the Autumn Budget on 27 October.

It possible these changes could align CGT and income tax rates, which would see CGT rates climb as high as 20%, 40% or 45%.

It would be advisable for investors to consider taking steps now to rebase their investment portfolios now in order to take advantage of the prevailing lower CGT rates. There are several ways to achieve this depending on your circumstances, whether you want to retain the assets and their liquidity. However any rebasing exercise will mean triggering realising capital gains tax during the 2021/22 tax year and therefore requires careful consideration.

If you would like our assistance in planning around these potential changes to the UK’s CGT regime then please contact us.