The annual capital gains tax free slice could fall from £10,100 to just £2,000 if David Cameron's new coalition government accepts the full Liberal Democrat tax package.
The coalition is the first such peacetime arrangement since the early 1930s and while the full shape of the government and its policies remain under wraps for the moment, at least one policy is clear: the budget expected in the next 50 days is likely to include at least one LibDem tax measure- a sharp rise in Capital Gains Tax (CGT).
The LibDems want a return to the 40% CGT rate on non-business assets. These include shares (held outside ISAs or pension plans) second homes, vintage port and works of art. The idea is to re-align rates with those for Income tax, a link broken by former chancellor Alastair Darling.
But if the entire LibDem proposal contained in its manifesto is accepted by new chancellor George Osbourne, the annual CGT exemption will fall to £2,000 from the current £10,100 per person. Many investors sell investments each year to take advantage of the annual free slice, to provide a source of tax free income.
Whatever the final decision on CGT is, one thing is clear: the only direction the tax will take is upwards from the current rate of 18%.
Allenbridge Group Managing Director Anthony Yagdaroff says: “If the full LibDem CGT package is accepted, investors will take a double tax hit. But whatever the final shape of the rules, taxes on investment seem set to rise. If you, your spouse (or civil partner) and any children over 18 have not yet taken full advantage in this tax year of your available tax allowances in ISAs and SIPPs (self-invested personal pension) and other forms of personal pension, you should carefully consider doing so, if you have available cash resources.”
The current ISA personal allowance is £10,200, so a couple can place £20,400 beyond the reach of the taxman, safe from income tax or CGT.
“It may be wise not to leave a decision until after the Budget! But if you are uncertain at this stage which funds to invest in, you can take advantage of the opportunity to ‘park’ your cash in Cofunds' ISA Cash Reserve or Fidelity FundsNetwork's ISA Cash Park account while you make your decision,” adds Yagdaroff.
And in a SIPP, or other form of personal pension, anyone under 75 you can invest up to 100% of annual earnings with a limit of £255,000 in the current tax year with tax relief on contributions. If, for example, you invest £20,000 in a SIPP, it might effectively cost you only £10,000 if you are a 50 per cent taxpayer.
This release from Allenbridge does not constitute a personal recommendation; you should consult your adviser. This may not be suitable for your specific circumstances.
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Kate Davidson, Public Relations and Media Manager at Allenbridge Group PLC.
Mob: +44 (0)78 1462 4161
Tel: +44 (0)20 7409 1111
Kate.davidson@allenbridge.co.uk
http://www.allenbridge.co.uk/
Anthony Yadgaroff, Managing Director at Allenbridge Group PLC.
Tel: +44 (0)20 7409 1111
Anthony.yadgaroff@allenbridge.co.uk
Notes to Editors:
Allenbridge Group PLC is a rare beast in the investment jungle, a Mayfair-based discount broker that also advises large FTSE corporate pension funds and global banks. Founded in 1985, it carries out specialist research and consultancy, analysing investment manager performance across a wide range of funds: Unit Trusts, Investment Trusts, Venture Capital Trusts, Enterprise Investment Schemes, Charities, Hedge Funds, Funds of Hedge Funds and institutional Pension Funds.
In addition to providing comprehensive advice and strategic investment consultancy to leading institutions, Allenbridge also offers monitoring services, valuations and its specialised AllenbridgeCare service to individual investors on investment products and tax-shelter vehicles.
Allenbridge’s private investor division serves over 14,000 clients; retail and institutional funds under advisement exceed £25 billion.