9 February 2010

Capital Gains Tax to increase?

Political parties are fighting over what public spending to cut, and where to raise taxes, but there's general agreement that both of those have to happen. One tax area which seems ripe for attention is Capital Gains Tax (CGT).

The current flat rate of 18% was introduced only in 2008, but the rate feels lower than the general tax environment. So an increase after April 2010 seems a good possibility, and the annual allowance is unlikely to increase - effectively a stealth tax. So what could you do to prepare?

One thing you are unlikely to be able to do anything about is second (and third, ...) homes. If a property which you rent out has increased in value since you bought it, then you will have capital gains tax to pay when you sell. However you are unlikely to start thinking about selling now if you weren't already, and selling in a short space of time in the current market seems unrealistic.

Other than that, investments which are not protected in an ISA (or some other) tax wrapper are potentially vulnerable to CGT. Selling them now would be a good thing if you had considered selling in the near future. Making use of your annual ISA allowance is generally worthwhile since it will avoid CGT in future.

Transferring assets between spouses may be appropriate prior to selling - there is no CGT implication of doing that transfer, and you could make use of two lots of the annual allowance when you finally sell.

Other than that, taking professional advice is good advice - remember that this blog does not provide personal financial advice.

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