13 June 2024
If you are covering the Labour manifesto, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
"The conspicuous lack of confirmation from the Labour manifesto that it would not raise Capital Gains Tax (CGT) will spark significant concern among entrepreneurs and investors in the UK. Both Shadow Chancellor, Rachel Reeves, and Sir Keir Starmer have in recent interviews doubled down on the fact they have “no plans” to increase CGT rates without completely ruling it out. However, in its manifesto Labour has explicitly ruled out increases to income tax, National Insurance, VAT and corporation tax, but make no mention of CGT.
"Those who face CGT in the UK – primarily higher rate taxpayers and entrepreneurs who realise gains from the sale of residential property, investments, and other chargeable assets – have already seen their annual exempt allowance slashed by the current Conservative government to just £3,000 a year. If Labour is to win the general election and then increase rates, it would serve as a double whammy with higher rates and lower exempt allowances considerably increasing the capital gains tax take.
"Under the current system, higher rate taxpayers face a 24% CGT on residential property gains and 20% on other chargeable assets. The potential alignment of CGT rates with income tax rates, if that is what ends up being enacted, could see these figures rise dramatically, impacting not just the wealthy but also a substantial number of small business owners and investors who play a crucial role in driving the economy in the UK.
"For those looking to mitigate the impact of CGT there are several strategies you can employ. Transferring assets to a spouse can be an effective way to maximise the use of both partners’ CGT allowance. Additionally, utilising tax-sheltered accounts such as ISAs can shield gains from CGT altogether. It has therefore never been more important to maximise your £20,000 ISA allowance. Other more complex options include deferring gains by investing in Enterprise Investment Schemes (EIS) however these carry significant risk and it’s important to get professional financial help when looking at these types of options."
