The recent Autumn Budget brought some big changes to Capital Gains Tax (CGT) rates, which could impact many UK investors. If you have a diversified portfolio or significant assets outside tax-free accounts like pensions or ISAs, these adjustments may affect your financial plans and how you manage your investments.
What’s Changed in Capital Gains Tax?
Here’s a quick breakdown of the new CGT rates:
- Lower rate increased from 10% to 18% for most assets.
- Higher rate increased from 20% to 24% for higher-rate taxpayers, excluding residential property.
- Residential property rates remain the same, with the basic rate at 18% and the higher rate at 28%.
In short, this change means that a larger portion of your hard-earned gain could now go toward tax when selling assets like stocks, bonds, or additional properties. With these increased rates, it’s a good time to consider your options and take advantage of tax-efficient strategies.
How Could This Affect You?
- Selling Investments: If you are planning to sell investments outside of pensions or ISAs, such as General Investment Accounts (GIA), Investment Trusts (IT) or individual shares, the increased rates mean that more of your gains could be taxed. For higher-rate taxpayers, each £10,000 in capital gains could now result in up to £2,400 in tax instead of £2,000.
- Property Owners with Diverse Portfolios: Even though CGT rates on residential properties haven’t changed, if you are balancing property with other taxable investments, it’s worth reviewing the tax impacts on your overall portfolio.
- Inheritance and Wealth Transfer: The increased rates may also influence your estate and inheritance planning. Rising CGT rates make it more important to consider how to structure wealth transfers, reducing future tax burdens on loved ones.
Practical Steps to Reduce CGT Exposure
To make the most of your investments under the new CGT rules, here are a few strategies that could help:
- Boost Pension Contributions: Since pensions are exempt from CGT, they allow investments to grow tax-free. Increasing your contributions could lower your taxable income while helping build your retirement fund. At Flying Colours, we offer an expert pension planning service and can advise you on the best approach to reach your goals.
- Make the Most of ISA Allowances: ISAs offer a tax-free way to invest, protecting returns from both CGT and income tax. Maximising your annual ISA contributions is an effective way to grow wealth without the impact of rising CGT rates.
- Plan Asset Sales Thoughtfully: If you’re thinking of selling assets impacted by CGT, timing can make a difference. Spreading gains over multiple tax years can help you use your annual CGT allowance of £3,000 fully, potentially reducing your tax bill.
How Flying Colours Can Support You Through These Changes
If these changes have raised any questions, or if you’re thinking about how best to protect your investments with the new CGT rules, we’re here to help. At Flying Colours, we are dedicated to helping you make informed decisions to safeguard and grow your wealth.
Our independent financial advisors, based across the UK, know the importance of getting this right and are committed to guiding you with confidence, with strong track records at getting the best results and outcomes for our clients.
If you would like to discuss your financial planning further, we would love to schedule some time to talk, just get in touch with us here via our contact form, or call one of our offices directly and we can schedule some time to talk.
You can call our offices:
Lincoln – 01522 437 360
Liverpool – 0151 317 7820
Bracknell – 01344 266030
