Coalition Tax Plans: Capital Gains Tax
Coalition Tax Plans: Capital Gains Tax
With the Conservative / Liberal Democrat government now settling down to business, taxpayers are starting to consider the shape of the tax policy of the coalition, in the light of the second budget that is expected within 50 days.
Perhaps the most pressing issue relates to capital gains tax. The coalition agreement states:-
"We further agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities."
This is a clear warning that capital gains tax might rise to say 40% (it is reported in some newspapers that the top rate of 50% will not apply), in line with income tax rates, for non business assets. Non business assets would include share portfolios and second homes, as well as a host of other assets.
The statement is only "an agreement to agree" and no time scale is mentioned. The immediate concern is that, although not in accordance with past practice, capital gains rates could be raised on the day of the forthcoming budget, and not from say 6 April 2011.
Individual circumstances will dictate the best response, but some thoughts are:
- While share gains can be realised easily, remember the 30 day bed and breakfast rule and take into account market volatility.
- Settlements into trust might be considered to trigger gains on other assets, but this would throw up a number of considerations.
- "Uncompleted contracts", forward sales and options may be attractive in some circumstances.
- This might be the time to encash loan notes or remit stockpiled gains from offshore trusts, taking advantage of the current known rates.
- EIS investments might become more attractive because of their capital gains tax deferral opportunities.
Please speak to your usual C+T contact or any member of our tax team to further discuss matters.