Reports that Chancellor John Healey has ruled out a further increase in capital gains tax have been welcomed by industry commentators ahead of next week’s Autumn Budget.
Reports that Chancellor John Healey has ruled out a further increase to capital gains tax (CGT) at next week’s Autumn Budget have been welcomed by industry commentators, with several highlighting the potential impact on investors and long-term planning.
The reported decision follows a decade of changes affecting investors, including reforms to CGT, dividend taxation, ISAs and pensions.
Analysis from IG found that since 2016 there have been 20 announcements relating to investment taxes and rules affecting UK retail investors.
These include reductions to the Dividend Allowance, increases to CGT rates, the abolition of the Lifetime Allowance, increases to the pensions Annual Allowance, changes to ISA rules and the introduction and subsequent withdrawal of the proposed British ISA.
Michael Healy, CEO of IG Consumer, said: “Investing for the long term requires confidence that you understand the rules you’re investing under. But over the past decade, investors have faced repeated changes to investment taxes and rules.
“It’s not just changes that come into force that create uncertainty – investors also have to navigate proposals that are subsequently changed or dropped, let alone those leaked ahead of Budgets.”
He added: “Reports that the Chancellor has ruled out raising CGT are welcome and would send a much-needed positive signal to investors.
“The Government must now build on this by committing to a stable investment tax regime that gives more people the confidence to invest for the long term.”
AJ Bell also welcomed the reports, with Sarah Coles, head of personal finance, saying that the decision could help avoid unintended consequences.
“John Healey has reportedly ruled out raising the rate of capital gains tax (CGT) in the Budget. Investors will be pleased to see the end of those potentially damaging Budget rumours, at least for now,” she said.
Coles said the decision was “probably a sensible move from a tax revenue perspective”, pointing to recent CGT receipts and the possibility that investors may change their behaviour in response to tax changes.
However, she noted that although a rise in CGT rates may have been ruled out, other potential changes to the regime could remain available to the Government.
“Technically, Healey could change the CGT annual allowance again, even cutting it altogether,” she said, while also highlighting previous suggestions that CGT could become payable on death.
Coles said planning for CGT remained important and pointed to measures including Stocks and Shares ISAs, pensions, the use of annual exemptions, tax-loss planning and spousal transfers.
Rob Morgan, chief investment analyst at Charles Stanley Direct, part of Raymond James, said the reported decision would remove some uncertainty ahead of the Budget.
“Chancellor John Healey ruling out a further increase to capital gains tax (CGT) will provide some reassurance to business owners and investors ahead of the Autumn Budget.
“The decision suggests the Treasury is increasingly focused on the risks of behavioural change rather than just the headline rate. Higher CGT rates can encourage investors to delay asset sales, potentially reducing the amount of tax ultimately collected.”
Morgan also suggested the move may reflect wider concerns around competitiveness and investment, noting that “stability in the CGT regime may be seen as a more effective approach than further rate increases”.
Main image: Tax, cropped, jon-tyson-qAQsVsSxp_w-unsplash
