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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.

Don't miss THIS on your self-assessment tax return!

Don’t Miss THIS on your Tax Return! (Checklist)

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Don't miss THIS on your self-assessment tax return! (Checklist)

The standard Self-Assessment Tax Return includes all the usual areas that you’d expect to have to confirm to HMRC. These include the obvious things like personal details, information about income for the period in question, any assets, dividends, interest received, pensions and so on.

However, there are a number of additional areas that you need to check and confirm before the return is submitted and filed with HMRC. It’s not an exhaustive list, but things people sometimes miss and that you need to check you have allowed for (if applicable) include:

  • Employment Income — have you confirmed any employment income? Have you supplied Taxfile, if we’re your tax agent or accountant, with copies of P60’s and P11D’s. Did you have any employment expenses?
  • Self-Employment Income or Partnership Income — have you confirmed any self-employed or partnership income and relevant expenses? Have you supplied all CIS vouchers, invoices, cash income etc. if applicable?
  • UK Land & Property Income — have you confirmed any rental income and relevant expenses for each property you perhaps rent out?
  • Foreign Income — did you receive any foreign income? Have you confirmed it?
  • Trust Income — did you receive any trust income or are you treated as having received any trust income?
  • Capital Gains — have you sold any assets or investments which may be subject to capital gains tax e.g. a rental house, stocks and shares etc?
  • Residence — were you, for all or part of the year, not resident, not ‘ordinarily resident’ or not ‘domiciled’ in the UK?
  • Investment Income — have you confirmed any bank/building society interest, dividends, etc?
  • Pension Income — are you in receipt of any? It needs confirming if so.
  • Any other income received that doesn’t fit into any of the above e.g. Job Seekers Allowance, Tax Credits? Child Benefit is an important one, especially if one parent is earning £50k or more. Marriage Allowance is another.
  • Do you have a pension that you pay into? If so, how much did you pay for the period in question?
  • Have you given any money to charity? Higher rate taxpayers can usually get extra tax relief on this.
  • Do you have a student loan?
  • Are you subject to the High Income Benefit Charge?
  • Do you use a service company?
  • Have you been paying your National Insurance?
  • Have you been keeping good records?

Taxfile will always prompt you to check for things like these if you’re our customer, before we submit your tax return on your behalf. As we say above, though, the list is not an exhaustive one, so there may be other information we need, depending upon your individual situation. The list of what HMRC requires each year also Read more

Tax advice

Case Study: a high rate taxpayer in a complex tax situation

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The Client

A new client, Mr ‘K’,  is a higher rate taxpayer who previously used to file his own tax returns.

The Problem

Mr K got into a complicated financial situation in 2013/14 due to having received redundancy pay, severance pay waiver, investment income, PAYE income and pension income. He needed professional guidance and advice regarding his tax liability.

The Solution

Taxfile looked into all the records and correspondence regarding the redundancy and severance pay so as to make sure of the right tax treatment for each. We also calculated the various tax rates for each type of income and advised that the remaining tax liability should be collected through the tax code system.

The Result

The client was reassured that the tax calculation was done professionally and accurately and was able to pay the right amount of tax in the most appropriate way.

Client Feedback

The client was impressed with how quick and efficient Taxfile’s service was and, as a result, is continuing to use our service now and into the future. Read more