Capital Gains Tax Increase

The rate for basic-rate tax-payers has increased with immediate effect from 10% to 18% and the rate for higher-rate tax-payers will increase from 20% to 24%.

The new rates will now match the current property rates of CGT.

Whilst it was feared the rate would be doubled to 20% and 40% respectively, the increase for basic-rate tax payers virtually has, whereas higher-rate tax-payers are only paying a further 4%, so it hits basic rate tax-payers much harder. For our clients, this will mainly affect those with larger General Investment Accounts (GIAs). Bed and ISAs, whereby you sell funds and re-invest them into the same funds but via an ISA is common practice now and will remain so. We can automate the Bed and ISA so that you can sell £20,000 from your GIA every April and re-invest it into the ISA.

Some life companies are using the rise in investment CGT to promote investing in investment bonds instead. Investment bonds automatically have Corporation tax deducted from their share of the profit and have higher charges, so we think it is still better to remain invested in GIAs. The exception is if you are investing via a trust, as an investment bond is still considered the best investment vehicle for trusts.

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