CGT and its impact on investors

Stavros_3

Most of the papers this morning are reporting that CGT is set to rise to 40 - 50%. There's no mention of any tapering or the rates to fall in line with an individuals tax status, so we'll have to wait until the budget. But if it is a blanket rise to 40% across the board for everybody irrespective of their income tax status then what is to stop people from cashing in their investment portfolio's before the rate rise comes in............................unless the sneaky gits make it retrospective to the start of the current tax year.

StevieJ

If the situation is as you state (also with minimal annual allowance) I will be cashing all mine in, this tax rise tail will certainly be wagging my investment dog. I actually think they are softening investors up so whatever they introduce doesn't seem quite so bad.

dunstonh

what is to stop people from cashing in their investment portfolio's before the rate rise comes in.

Nothing assuming it isnt retrospective.

However, you do have to remember that the vast majority of normal investors are not going to be hit by it and it can be easily avoided with planning.

1 - Use the ISA allowance.
2 - A 10% gain on £100k is £10k. That is still below the CGT annual allowance. So, use the annual allowance, even in years that may be down you may have funds that still have gains that can be realised.
3 -(linked with 1) - bed & ISA.
4 - use your spouse
5 - possible option if CGT goes up too much in with no taper and your portfolio is in the hundreds of thousands - use investment bond wrapper instead of leaving the investments unwrapped (modern investment bonds offer the unit trust funds and some allow direct investments as well).

In my opinion, far too much is being made of the CGT issue in the presentation of who it will effect. It will have no impact on savers (as savings accounts are subject to income tax). It will have no cost impact on most investors with portfolios up to around £500k as long as they utilise allowances and take care. Its the big investors that will be worse off.

opinions4u

dunstonh wrote: »

Its the big investors that will be worse off.

Raising the key question:

Doesn't the nation need the "big investors" here to drive the growth that the economy needs?

Taxing them highly will simply make them take their money elsewhere.

40% or 50% of nothing is nothing.

18% of something is more than nothing.

It's a difficult game for the chancellor to balance and if he makes a wrong call on it significant taxes on the middle classes will be his only fallback position.

My own view is that CGT allowances need to be significantly higher.

dunstonh

Doesn't the nation need the "big investors" here to drive the growth that the economy needs?

Absolutely.

However, the media campaign doesn't correctly present the who will be hit. You frequently see the phrase "ordinary savers" (Scotsman) or "prudent savers" (Telegraph) or "working class savers" (telegraph) or "middle class savers" (mail).

I dont know what the above posters have invested but we know that small investors and savers who are not going to be hit by CGT changes are worried about it due to media misrepresentation.

StevieJ

dunstonh wrote: »

2 - A 10% gain on £100k is £10k. That is still below the CGT annual allowance. So, use the annual allowance, even in years that may be down you may have funds that still have gains that can be realised.
.

So you know what is in the budget then one of the LibDem wishes was for a reduction of the allowance to £2k how do you know this will not happen i.e. have I missed an announcement?

iinvestor

the reason CGT is currently much lower than income tax is because, people are RISKING their capital in order to make capital gains.

Capital is very mobile and if their aren't sufficient rewards then investors will go elsewhere.

Without capital their is NO BUSINESSES.

if CGT increases substantially the larger investors will sell and the smaller investors will suffer.

Sceptic001

dunstonh wrote: »

Absolutely.

However, the media campaign doesn't correctly present the who will be hit. You frequently see the phrase "ordinary savers" (Scotsman) or "prudent savers" (Telegraph) or "working class savers" (telegraph) or "middle class savers" (mail).

I dont know what the above posters have invested but we know that small investors and savers who are not going to be hit by CGT changes are worried about it due to media misrepresentation.

I fully agree with dunstonh and opinions4u. Savers should be far more worried about the effects of inflation eating away at their savings at a rate of 3-5% (depending on which measure you use). This is far nastier than tax, which at least (hopefully) gets spent on something useful. :rotfl:

As an aside, the media is also woeful on BP. Every report I have seen has bemoaned the effect of the BP share price fall and dividend cut on "pensioners" when, in fact what they mean is people with money invested in pension funds. I wonder how many current pensioners worry that the man from the Pru is going to ask for some of their pension back? :mad:

Mikeyorks

Stavros wrote: »

But if it is a blanket rise to 40% across the board for everybody irrespective of their income tax status then what is to stop people from cashing in their investment portfolio's before the rate rise comes in.

Clearly there's nothing to stop them ....... apart from common sense perhaps?

If you liquidate the entity of investments that may be subject to CGT what do you do with the proceeds? I'd prefer 60% of the gains I've made this past year ........ than a maximum of 3.2% net in cash accounts.

StevieJ

Mikeyorks wrote: »

Clearly there's nothing to stop them ....... apart from common sense perhaps?

If you liquidate the entity of investments that may be subject to CGT what do you do with the proceeds? I'd prefer 60% of the gains I've made this past year ........ than a maximum of 3.2% net in cash accounts.

But I bet you would have taken the 3.2% the year before that

RayWolfe

Agree with the majority of posters here.
The press likes nothing more than terrifying people who don't understand the truth. It was (IS) the same with IHT. In fact, it seems that newspaper owners and editors, who are probably in the top income decile, are the people who may be hit and use their papers to serve their own interest!
Shame on them.