During the Budget, the Chancellor increased Capital Gains Tax (CGT) for non-residential assets from 20% to 24% at the higher tax rate. The lower CGT rate will rise from 10% to 18%. The news marks an increase of at least 4% for those making gains from share sales.
As a result of this, more than a quarter of DIY investors (27%) say they will move more assets into tax wrappers or products like SIPPS and ISAs to be exempt from CGT, according to new research from Charles Stanley Direct.
Other ways they hope to pay less CGT include making fewer trades (23%) and reweighting their portfolio towards assets with lower or no CGT (21%).
Some pre-empted certain changes the Chancellor could make and took precautionary measures. 14% said they sold assets before the Budget in anticipation of the rise and are pleased they did, while others (10%) did the same but regretted their decision.
A number of investors came out unscathed, with 17% saying they wouldn’t be making any changes to their investments as they don’t pay any CGT. Another 10% said despite the increase in CGT, they wouldn’t be making any changes to their portfolio as they are okay with the amount they currently pay.
Rob Morgan, Chief Investment Analyst at Charles Stanley Direct, comments: “DIY investors have been tasked with reevaluating their investments to make the most of their money following the announced increase in Capital Gains Tax. While the hike was less drastic than widely anticipated, it is still important to take stock and ensure your portfolio is correctly positioned, whether this is investing in tax-free assets or better utilising the whole family’s tax-free allowances. However, tax considerations are only part of the equation. Hoarding cash in fear of being taxed on investments can also drag back the wealth building process, leading to stagnation of income rather than growth.”
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