Concerns around a possible increase to capital gains tax is driving wealthy investors to sell ahead of the Budget.
New research from Wealth Club found nearly a quarter (24%) have already sold investments to avoid potentially higher rates, while a further 11% plan to sell before the Budget at the end of the month.
Pre-Budget speculation has suggested the Chancellor may raise CGT rates so they are aligned with income tax rates.
Wealth Club’s study, which was carried out among 506 clients with average wealth of £3.15 million, found a further 27% have considered selling investments but decided against it, while 33% say they have not considered selling ahead of any possible CGT increase.
Wealth Club said if a ‘significant’ increase in CGT is announced, it will have a major impact on the behaviour of wealthy investors, making them more likely to hold on to investments on which they have made large gains. More than two in five (41%) say if CGT increases significantly, they will be much less likely to sell investments while 15% say they would be somewhat less likely to do this.
Alex Davies, founder and CEO of Wealth Club, said: “Pre-Budget rumours and speculation about major increases to CGT are driving a wave of selling of investments by wealthy investors, and if a rise is implemented, it could lead to investors holding on to investments for longer than they would normally want to in order to avoid higher bills.
“The net impact of a rise in CGT rates could mean the Treasury raising less revenue as a result of a measure intended to boost receipts.”
Davies also warned that an increase in CGT rates could have the effect of making the UK a less attractive place to invest with knock-on effects on economic growth and employment.
“Governments have to make decisions on revenue and face a wide range of challenges but the impact on investor behaviour of a major rise in CGT would not deliver the results they want.”
