Many investors are now growing concerned and anxious that any gains they may make on their assets will be heavily taxed.
According to the Times, many investors are preparing to offload assets such as shares and second homes before the feared changes to Capital Gains Tax (CGT) are announced in the coalition’s emergency budget on the 22nd June.
Savills estate agents have seen a 40% increase in house valuation enquiries in the last ten days, the accountants BDO have been ‘inundated’ with enquiries and an unnamed wealth manager said that his clients had instructed them to offload shares.
The LibDem’s push for a ‘balanced’ tax system coupled with talk of raising CGT rates to “similar or close to” income tax levels has raised fears of an eye-watering rise of tax from the current 18% up to 40% or even 50% for some.
This though has angered many Tory back-benchers and John Redwood seems to have become the focal point for their concerns.
It was only in April 2008 that the current 18% limit came into force. Prior to that there was a rather complex system of taper relief, which was different for business and personal assets. The current level 18% was an attempt to greatly simplify the system. It did though seem to punish those that held assets for a lengthy period and reward those who bought and sold quickly.
Many of the assets held are part of people’s future wealth, financial and inheritance planning. They possibly hold property and / or shares as part of a carefully balanced portfolio. Any major tax changes will of course upset that balance.
We may well see a return to a taper relief type system, with exemptions for certain assets or types of asset holders. But whatever we should expect an overall increase in the amount of tax raised by CGT.