18% CGT - how are you responding?

aroominyork

So we’ve moved from ‘wait and see’ to ‘what now?’. In an earlier thread I was thinking of selling an unwrapped equity index fund and buying a medium duration low coupon nominal gilt, and to balance that I would sell a wrapped gilt index fund and buy the equity index fund. If CGT was not increasing until April I would now do that, taking the 10% CGT hit and leaving an amount of unwrapped equities to, assuming typical growth, let me sell the rest of the unwrapped equities over about three years within the CGT £3000 allowance. Having to pay 18% on the gain now makes it slightly less palatable... I’ll mull it over for a week or two.

What are others doing to respond to 18% CGT?

friolento

Having made the most of the generous limits for pension contributions and ISAs for many years, I don’t have unwrapped investments so I am happy to say I have nothing to respond to. 

InvesterJones

No change here - pleasantly surprised we've still got allowances so I'll continue to use them - I already bought gilts back when the yield to maturity was better so don't have a huge amount in equities in GIA these days, but if I had to go beyond allowances it still doesn't seem too bad at 18%.

Keep_pedalling

IanManc said:

I'm responding by not selling more than £3k worth of unwrapped investments per year until we get a more benign tax regime, if ever. 

I'm not voluntarily going to pay CGT and Reeves can whistle if she thinks she's going to get a higher capital tax take out of me.

You can sell more than £3k worth, you just need to sell no more than contains a £3k gain. So for example you can sell £6K of investments that have doubled in value, or sell £6k in stock that has halved in value along with £18k of stock that has double in value.

Hattie627

IanManc said:

I'm responding by not selling more than £3k worth of unwrapped investments per year until we get a more benign tax regime, if ever. 

I'm not voluntarily going to pay CGT and Reeves can whistle if she thinks she's going to get a higher capital tax take out of me.

This. (Sorry if this is deemed "political").

kempiejon

Hattie627 said:

IanManc said:

I'm responding by not selling more than £3k worth of unwrapped investments per year until we get a more benign tax regime, if ever. 

I'm not voluntarily going to pay CGT and Reeves can whistle if she thinks she's going to get a higher capital tax take out of me.

This. (Sorry if this is deemed "political").

For years I have contrived not to voluntarily pay income tax, I have never paid CGT, SDLT, it seems fairly simple to avoid. I don't have a 2nd home or realise assets heavy with gains above the limits. For over a decade of investing I got into the habit of resetting profits by taking some gains each year. Too late now to tell everybody else they should have done it but at these current levels one may as well bank up to the allowance each year, it's giving up tax free money not to.
I did get caught by dividend income tax, I wasn't quite quick enough to sell and move it all to ISA/SIPPS

aroominyork

IanManc said:

I'm responding by not selling more than £3k worth of unwrapped investments per year until we get a more benign tax regime, if ever. 

I'm not voluntarily going to pay CGT and Reeves can whistle if she thinks she's going to get a higher capital tax take out of me.

I love this idea of "I'm not going to voluntarily pay tax" and instead wait five, ten, ∞ years for the tax regime to maybe one day change. If you had a six figure sum of unwrapped equities gaining say 10% each year, would you really just watch the gains grow rather than take a tax hit and shelter them?

EthicsGradient

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

masonic

I took action when it was first announced that the £12,300 allowance was being reduced. What I previously had unwrapped is now in my SIPP. I pay some tax on my savings interest at 20%, which I probably could have reduced through the use of CSH2, now I can put that out of my mind. I suspect there could have been trouble ahead down that path anyway (how a money market fund could be considered by HMRC to generate capital gains rather than income is beyond me).

I really do think they missed a trick by making the current change immediate. There could have been a disposal bonanza had they given people some time, which could have resulted in more tax received than they'll get at the new rate.

ColdIron

aroominyork said:

IanManc said:

I'm responding by not selling more than £3k worth of unwrapped investments per year until we get a more benign tax regime, if ever. 

I'm not voluntarily going to pay CGT and Reeves can whistle if she thinks she's going to get a higher capital tax take out of me.

I love this idea of "I'm not going to voluntarily pay tax" and instead wait five, ten, ∞ years for the tax regime to maybe one day change. If you had a six figure sum of unwrapped equities gaining say 10% each year, would you really just watch the gains grow rather than take a tax hit and shelter them?

It does depend upon what type of portfolio is unwrapped. With planning CGT has always been, to a greater or lesser degree, an elective tax for investments (as opposed to other asset classes) but with the much reduced 'allowance' it's harder for a growth oriented one than it has been in the past

My growth portfolios are all wrapped, however I have a substantial (six figure) IT GIA purely for income. I used to Bed & ISA this each year but stopped about three years ago and I now use cash for my ISA(s) due to the tax differential and let the GIA run. As I will always have a need for income my plan is to not sell at all until I cark it and then it's an SEP (someone else's problem). Having some high dividend (and consequently low or more realistically negative growth) ITs only aids both income production and losses to offset gains at some point in the future

I do think that higher rate CGT only throws sand in an otherwise well oiled engine and can only reduce activity and increase behavioural change to the detriment of tax collection

Horses for courses but not selling is a viable tactic for some

aroominyork

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software?