Almost daily, articles are coming out on the possible decisions Labour are making for their Autumn Budget. To plug a £22 billion ‘hole’ in public finances, Prime Minister Sir Keir Starmer and Chancellor of the Exchequer Rachel Reeves allude to a ‘painful’ Budget, which involves ‘difficult decisions’.
One area gaining traction is capital gains tax (CGT). We spoke to Steve Lyon (Senior Paraplanner) about why CGT may be on the Budget radar, and what these changes could mean for you.
It is important to note that the following points from all commentators are views and thoughts on areas the Labour government may or may not review in the upcoming Budget. These are not based on current legislation, or on factual information. We do not advise acting on this information – instead, please speak to your Courtiers adviser or contact us.
Why is CGT on the radar?
Many media outlets have mentioned that CGT is one of the easiest taxes to change. There are four main reasons for this:
- Politically, it’s easy to justify a change in CGT. This is because the tax only affects those who are selling an asset, and only affects the gain achieved on the asset once it is sold (disposed).
- It’s following a trend. An individual’s Annual Exception Allowance has plummeted since 2023. At its peak, the exemption amount was £12,300. It’s now cut to £3,000, which we’ve acclimatised to, and a further reduction could be expected.
- It would simplify tax. Currently, the government assesses CGT against a lower rate of tax compared to Income Tax. CGT has a basic rate of 10%, with a higher rate of 20%. Increasing rates to the same as Income Tax (basic rate of 20%, higher rate of 40% and an additional rate of 45%) could be argued as simplifying tax at the same time as collecting more.
- It would be easy to implement administratively. With CGT mainly reported via self-assessment, potential changes would be relatively easy to implement as it wouldn’t require a big change to payroll and accounting systems.
What might any potential changes mean for you?
If the Government decide to make any changes, ultimately, it will be with the idea of increasing the amount of tax generated. So, for those who have assets that they are looking to sell off or gift, the potential changes are likely to increase:
- The likelihood of paying CGT and
- The amount of CGT charged.
As always, we will review your taxable investments and determine how to manage these to help protect your wealth and meet your objectives.
Working with Courtiers
This is why it’s beneficial to work with Courtiers in the run up to the Budget, and after. We can help support you and your wealth in the following ways:
- Ensuring we have strategies in place to deal with and respond to any changes.
- Taking all necessary steps to keep your wealth protected while adhering to legislation.
- Offering continued and up-to-date advice to support your financial decisions.
- Offering you bespoke product advice based on your specific needs.
Conclusion:
Currently, we are unsure of the exact changes the current Labour Government will make at the Autumn Budget. We understand that our clients may have several unanswered questions regarding their investments and wealth, and this can make them feel uneasy and unsure regarding their assets and plans. While Courtiers can’t answer these questions before the budget, we will be ready to assess how these changes will affect our clients’ investments and continue to review them to ensure we meet our clients’ financial objectives.
