Posted by James McNeile, Partner
‘Future changes in Capital Gains Tax’
You will no doubt be aware that the rate of Capital Gains Tax (CGT) is set to rise on 22nd June at the Emergency Budget. Whilst it is difficult to predict the exact nature of the tax changes, it is advisable to consider taking pre-emptive action to lock in the existing gains under the CGT regime.
There are a number of techniques that you can consider, for example, selling an asset or transferring it to a discretionary trust or another family member if appropriate.
There are clear advantages in taking pre-emptive action, including the possibility of locking in current gains at 18% particularly if any gains can be covered by the current CGT annual exemption. Since some predictions say that CGT could rise to as much as 50%, there is a huge potential tax saving. There is also the possibility of accelerating inheritance tax planning and removing assets from an estate for inheritance tax purposes.
There is a chance that the tax changes may be retrospective so any step should only be taken if they are practical, particularly since any assets held would crystallise a CGT bill which would be payable by 31st January 2012. There would also be stamp duty of 0.5% on any share transfers that may arise which will need to be funded separately.
The tax changes are particularly relevant if you are in the process of or expecting to sell a business or shares, or if you hold assets such as buy to let properties and investment portfolios with large inherent gains, and you are expecting to sell them in the short to medium term.