Money Clinic with Claer Barrett It was the "unavoidable Budget"- but will most investors avoid CGT?
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Jun 23, 2010 The discussion kicks off with the recent budget's influence on capital gains tax, raising critical questions about investor strategies. As rates jump from 18% to 28%, listeners learn how this might alter behaviors and decisions in asset sales. The complexities of fiscal drag are explored, particularly for higher earners, alongside the impact of tax threshold freezes. Alternatives for retirement funding are also highlighted, focusing on options like venture capital trusts that could benefit high earners seeking better investment routes.
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Impact of New Capital Gains Tax Rate
- The new capital gains tax (CGT) rate of 28% is a significant increase from 18%, but less than worst-case fears of up to 50%.
- Many investors are delaying assets sales to avoid higher CGT, as it's a choice whether to realize gains or not.
Investor Rush Before CGT Increase
- Many investors rushed to crystallize gains at the 18% rate before the new 28% rate took effect at midnight on budget day.
- The anticipation of capital gains tax increases caused a flurry of asset sales months before the budget.
CGT Rise Lessens Income Investment Appeal
- Investments that generate capital gains rather than income remain attractive despite CGT rise because CGT rates are still lower than higher income tax rates.
- Products like zero dividend preference shares and offshore reporting funds are likely to continue being favored by investors for tax reasons.