Flat Rate CGT “Will Boost Long-Term Savings” Says Fidelity

Nick Parmee 11 October 2007

Flat Rate CGT “Will Boost Long-Term Savings” Says Fidelity

The UK’s new 18 per cent flat rate of capital gains tax from April 2008 could serve as a boost to long-term savings, according to fund manager Fidelity International. Investors in equity funds held outside a tax wrapper such as a Personal Equity Plan or an Individual Savings Account are likely to benefit. Under the current arrangements for taper relief, higher-rate taxpayers face a minimum tax charge of 24 per cent on stock market gains on assets held for at least 10 years. The new rate of CGT will also make capital gains more attractive than income, whether generated by bonds or cash, which will continue to be taxed at 40 per cent for higher rate taxpayers. Even basic rate taxpayers will pay less tax on capital gains than on interest from a cash deposit account. Richard Wastcoat, UK managing director of Fidelity International, said: “For higher-rate taxpayers in particular, stock market investment will overnight become far more attractive than squirreling money away in a cash account. As a result of this change to CGT, many investors may choose to realise capital gains from their equity fund investments at regular intervals, rather than take income in the form of distributions or dividends. Capital gains can now be far more tax-efficient than income for many investors.”

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes