17 October 2024
If you are covering reports that the Chancellor is expected to increase capital gains tax on the sale of shares but not on the sale of second homes and buy-to-let properties, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“As Labour prepares to unveil its first budget later this month, capital gains tax (CGT) is firmly in the spotlight. An increase in CGT no longer seems to be a question of ‘if’, but rather ‘when’ and ‘by how much’. Reports suggest that Chancellor Rachel Reeves’ budget will include a “several percentage point” increase in CGT for sales of shares and other assets, while notably excluding second homes and buy-to-let properties.
“Currently, the CGT rate for sales of shares stands at 20%. There had been speculation that this rate could be hiked to as high as 39%, a figure that was recently dismissed by the Prime Minister. Instead, a more modest increase appears to be on the cards.
“A comprehensive reform of CGT may have been deemed too complex and time-consuming for the Chancellor to tackle immediately. Therefore, raising rates could be seen as a temporary measure aimed at boosting government revenues in the short term. However, the effectiveness of this approach is debatable. The key question is whether higher CGT rates will actually generate more tax revenue or simply alter investor behaviour.
“Without a delay before implementation, higher CGT rates might encourage individuals to hold onto their assets longer, rather than triggering an immediate surge in tax revenue. Additionally, it could lead to increased use of tax-efficient products such as ISAs and investment bonds.
“Given the current tight squeeze on various tax allowances and thresholds, and the swirling rumours ahead of the budget, it is advisable to seek professional financial advice. This will help ensure that you make the most tax-efficient decisions for your specific circumstances.”
