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The CGT conundrum

Siobhan Record Our Lifestyle’s Financial Expert

The coronavirus pandemic is now wreaking havoc with public finances and there are huge gaps that will at least partly need to be plugged by tax rises. With Rishi Sunak calling for a review of Capital Gains Tax, could a long suspected increase to this tax be on the cards for the next budget?

There are multiple ways in which CGT could be amended to raise revenue from investors: at 10% for basic rate payers and 20% for higher* whilst the main rates of income tax are double that at 20% and 40% respectively. £12,300) could be scrapped – potentially with the personal allowance being amended to cover capital gains too – or reduced to a de minimis level, similar to the £2,000 dividend allowance. on the disposal of qualifying business assets - this has already been limited to £1m of lifetime gains (from £10m) and there have been many calls for it to be scrapped all together. * plus 8% surcharge on residential property Principle Private Residence relief – currently all gains made on a main residence are CGT exempt. There have been some suggestions that this relief should be limited, to perhaps gains of £200,000 per transaction. The previous review of Inheritance Tax recommended changing CGT treatment on death. Currently the purchase cost of assets is uplifted to the value at death, wiping out

The headline rate - CGT is currently charged

The annual exemption to CGT (currently

Entrepreneurs’ Relief - reduces CGT to 10%

taxable gains accrued in lifetime. This leaves investors with some potentially difficult decisions to make where they hold large unrealised gains. The question is whether or not to realise gains now, paying tax at a known (possibly lower) rate to avoid a potential tax increase that we don’t know will actually happen.

It’s a complex conundrum particularly for those planning to hold assets through to death. Advance warning helps but unfortunately that luxury is not always a given.

If you are interested in knowing more about how I work and have investments of over £100,000 why not give Jo a ring on 01562 745730 to arrange a no obligation 30 minute free meeting in our offices.

The information in this article does not constitute investment advice; you must not rely on the content when making investment decisions without taking advice. Past performance is not a reliable indicator of future results. The value investments and the income from them, may fall or rise and investors may get back less than they invested.

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