Nine in 10 advisers admit clients have concerns regarding capital gains tax (CGT) ahead of chancellor Rachel Reeves’ first Budget on 30 October.
Research published today (5 September) by investment tax reporting experts Financial Software Ltd (FSL) shows the extent to which this concern is growing.
The stats show an increasing number of investors are seeking expert advice to protect their assets and avoid being brought into scope.
The study of over 130 financial advisers, commissioned by the Lang Cat, showed more than 91% of advisers reported that CGT is of greater concern for them and their clients compared to two years ago.
This comes as speculation mounts about a potential overhaul of the tax regime on 30 October.
High-rate taxpayers currently pay a 24% levy on gains from residential property or 20% on other assets.
Industry commentators suggest this could be raised to match income tax.
The latest statistics from HMRC show that since 2019/20, the number of people paying the tax has risen from 272,000 to 369,000, a 36% increase.
Similarly, forecasts from the OBR show CGT receipts are expected to surge to £15.2 bn in 2024-25 following last year’s reduction in the Personal Allowance from £12,300 per year to £6,000.
With the allowance halved again to £3,000 for the current tax year, the expectation is that CGT receipts will increase further still.
Illustrating demand for CGT support, further data from the Lang Cat’s Analyser software shows that advisers are looking for solutions from providers.
Over the past year, two thirds (62%) selected CGT tools when conducting their due diligence and looking for platforms to partner with.
The analysis shows that having a CGT calculator was the top-ranking extra feature out of a total of 600 options, sitting below the vital hygiene factors of having a Gia, Isa, Flexi-Access drawdown, and access to whole of market.
Michael Edwards, Financial Software Ltd managing director, said: “These findings confirm what we are hearing from our conversations with advisers as more people are being brought into scope for CGT with persistent pressures on the Personal Allowance.
“Understandably, many investors will be feeling nervous about potential changes to the regime and how this might impact their assets. They will be turning to advisers for their expertise to ensure they maximise all the tax allowances available to them.
“For this reason, advisers need access to essential tools that provide timely and accurate information. This will enable them to recommend the best possible solutions for their clients, ultimately delivering better outcomes.”
Greg Moss, founder of Eleven.2 Financial Planning added: “CGT is going to be a big planning issue for clients and their advisers for the foreseeable future.
“Shrinking allowances have already moved us from a position where most mass affluent clients have few planning needs around CGT, beyond making sure allowances don’t go unused to us having to be far more hands-on, managing the tax exposure and trading off portfolio structure with tax incurred. Any further moves to increase the tax burden on capital gains will make this need even more acute.”
No class Traitor RR will be smiling quietly… the CGT haul for this F. Year is likely to be huge… then I suspect the dwindling will be explained away as the fault of ‘non working people’… the Devils!!
One aspect which has had little/no comment is an exit tax – common elsewhere, justified as the gains have been accummulated whilst resident, inescapable, and easy + cheap to implement. This would be similar to a company exiting – all assets are treated as gains less the liabilities etc. There is a S.80 Trust get out… I suspect this will, (perhaps like trusts generally), come under scrutiny at least.
So far, RR has shown all the hallmarks of a Teflon Brown rebirth – someone please take away his new train set – the so called black hole of £22B will be nothing compared to the big Public Sector payouts coming, + Child care, + Rail costs, + Ed ‘Disco Biscuit’ Miliband’s world greening programme…. +…
CGT is the easiest target – not even death is required – and pension sums not vested will likely be coralled too in the same vein. Collateral damage from reducing/extending time for Business Relief and such is another factor – this would help with IHT take too.
Yep… time to cease sneering at my casino/short flat race distance suggestions… the odds vs risks are looking very attractive compared to the wise old souls at ‘Fund Managers… for big salary & bonuses… For You’ brigade!!
I confess to be somewhat bemused. In the universe of financial advisers, surely clients are advised to place their investments into ISAs. I know there are now several who are ISA millionaires. In other spheres I can see that CGT is an issue. Share options, entrepreneurs selling assets and the mega wealthy who doubtless have excellent advice to avoid this impost. Anyway, it isn’t levied until there is a cash in – so just hold on if at all possible and divest within the nil rate band (if there is still one!)