More than a quarter of DIY investors plan to use tax wrappers like SIPPs and ISAs to avoid increased capital gains tax, according to Charles Stanley Direct.
During Labour’s inaugural Budget in October, the Chancellor raised CGT for non-residential assets from 20% to 24% at the higher tax rate, while the lower rate will rise from 10% to 18%.
As a result, 27% of DIY investors will move assets into tax wrappers or products like SIPPS and ISAS, according to the research from Charles Stanley Direct. A similar proportion (23%) said they plan to make fewer trades to avoid paying more CGT, while 21% said they will reweight their portfolio towards assets with lower or no CGT.
Some investors pre-empted changes in the Budget, with 14% admitting they sold assets ahead of the Chancellor’s announcement in anticipation of the rise and are pleased they did so. However, 10% who did the same regretted their decision.
Less than a fifth (17%) said they would not be making any changes to their investments as they do not pay any CGT, while a further 10% said that they would not be making changes despite the increase in rates.
Rob Morgan, chief investment analyst at Charles Stanley Direct, said: “DIY investors have been tasked with reevaluating their investments to make the most of their money following the announced increase in capital gains tax. While the hike was less drastic than widely anticipated, it is still important to take stock and ensure your portfolio is correctly positioned, whether this is investing in tax-free assets or better utilising the whole family’s tax-free allowances.
“However, tax considerations are only part of the equation. Hoarding cash in fear of being taxed on investments can also drag back the wealth building process, leading to stagnation of income rather than growth.”
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