Tax
UK Capital Gains Tax Will Increase - RBC Wealth Management Advises What To Do
The new UK government will increase capital gains tax, says Louise Somerset, tax director at RBC Wealth Management, as she provides advice on how individuals can prepare for this tax rise, which will be announced in the emergency budget on 22 June 2010.
Somerset said that the first budget of the UK’s new coalition government of Conservatives and Liberal Democrats will leave Britons in “a very different tax environment”.
“The existence of a coalition has forced both parties to give up some of their tax plans while accepting some from the other,” Somerset said, referring to the Liberal Democrats' "mansion tax" and the indefinite deferral of Conservative plans for reforming inheritance tax.
She said that it is clear that the coalition will increase capital gains tax, bringing it in line with income tax.
“For many people this means that the tax due on the sale or gift of assets may more than double. It is possible that the new rate will take effect immediately.”
Earlier this week, WealthBriefing reported that Baker Tilly, the UK-based accountancy and business advisor, predicted the new CGT to be levied at two rates, 20 per cent and 40 per cent. According to the firm’s calculations, gains that take the vendor over the threshold of £37,400 will be liable to tax at 40 per cent.
Somerset recommends that individuals should consider crystallising capital gains on business assets before the budget in order to guarantee a 10 per cent effective tax rate on the first £2 million ($2.9 million) of gains they make.
With regards to property, she said that individuals should consider locking in the 18 per cent CGT rate for buy-to-let properties by selling them to for example a family member before the budget, to avoid the possibly much higher tax rates on investment properties later on.
She added that if one has other investments standing at a gain, one should consider selling them now. In the case of quoted shares, Somerset said that it may be worth considering "bed and breakfasting" shares by selling them now and buying them back after 30 days, benefitting from the 18 per cent tax rate without selling the investment.
She said that selling assets standing at a loss should be delayed until after the Budget.
More on the UK’s emergency budget can be found here.