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Capital Gains Tax Hike: A Blow to Investors

Capital Gains Tax Hike: A Blow to Investors

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Capital Gains Tax Hike: A Blow to Investors

October 2024’s Autumn Budget delivered a significant blow to investors with the announcement of increased Capital Gains Tax (CGT) rates. Today, we explore the new rates, how they will affect the sale of assets, and how investors can mitigate their effects.

The New Capital Gains Tax Rates

Effective from 30th October 2024, the basic rate of CGT will rise from 10% to 18%, and the higher rate will increase from 20% to 24%.

What This Means for Investors

These changes will make it more expensive for investors to realise gains from selling assets like shares, bonds, and cryptocurrency. This could lead to a number of consequences, including:

  • Reduced investment activity — investors may be less inclined to sell assets, particularly if they expect to make significant gains;
  • A shift towards tax-efficient investments — investors may seek out tax-efficient investments, such as ISAs and pensions;
  • A greater need for tax planning — investors may require more sophisticated tax planning strategies to minimise tax liabilities.

How Can Investors Mitigate the Impact of the CGT Increases?

Investors have several ways to mitigate the worst effects of the CGT rate increases. They can:

  1. Seek professional advice — a good tax advisor like Taxfile can help investors understand the full impact of the changes and develop a tax-efficient strategy;
  2. Review their investment portfolios to identify the potential tax implications of the new CGT rates;
  3. Utilise tax-efficient investments, for example, through the use of tax-efficient wrappers like ISAs and pensions;
  4. Time investments wisely — carefully timing the sale of assets may help to significantly reduce CGT liabilities.

Chancellor Philip Hammond's Autumn Budget Statement, 22 November 2017

The Chancellor’s Autumn Budget 2017

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This week, Chancellor of the Exchequer Philip Hammond delivered his Autumn Budget Statement to the House of Commons. View his full 1 hour speech in the official UK Parliament video below, which also includes a response from Jeremy Corbyn, leader of the opposition:

The biggest news from this budget was the Stamp Duty announcement, wherein first time buyers buying a property up to £300,000 in value will no longer pay Stamp Duty at all (saving £5k), nor pay it on the first £300,000 of homes costing up to £500,000. Money man Martin Lewis gave his take on the proposed Stamp Duty changes and answered frequently asked questions pertaining to exactly what defines a first time buyer in an interview on Good Morning Britain yesterday — here is a 5 minute clip:

Other winners included

  • The Personal Allowance, which is the amount people can earn before they need to start paying income tax, is set to increase by £350 from £11,500 to £11,850 for those earning up to £100k per annum.
  • The National Living Wage (NLW) will increase from £7.50 to £7.83 per hour from April 2018. This will affect UK workers aged over 25.
  • The Chancellor promised investment of £160m in 5G mobile networks …
  • … and a total of £550m for electric cars.
  • He also set aside an additional £1.5 billion in Universal Credit to help those on benefits.
  • £40m was set aside for a teacher training fund for under-performing schools in England.
  • NHS England is to receive £2.8BN in investment (less, though, than the £4BN NHS bosses said is needed).
  • From April 2018, the Consumer Price Index (CPI) is set to replace the Retail Price Index (RPI) as the inflation measure through which business rates will be calculated. It is anticipated that this change will save businesses £2.3BN in the first three years of the change.
  • The Chancellor also abolished the very unpopular staircase tax and promised that those affected to date by the staircase tax would see original rates reinstated. Revaluations will take place every three years (previously five) after the next scheduled revaluation in 2022.

Losers included:

  • The Chancellor revised down the growth forecasts for GDP, productivity growth and business investment.
  • £3BN was set aside for helping to combat Brexit challenges.
  • For second property owners, powers have been given to local authorities to charge a 100% council tax premium on empty houses. (See our note about those getting an income from property rental below).

If you have any questions about how the Autumn Budget might affect you, or any queries about any tax or accounting issues and requirements you may have, simply contact Taxfile on 0208 761 8000, send us a message here or book a 20 minute appointment online here and we’ll be happy to help. We also offer specific tax help and accounting for landlords so do get in touch if you would like to make sure you’re claiming no more and no less than you should if you’re getting an income from letting property.

Links to more detailed HMRC information about the Autumn Budget Statement can be read online here.