interactive investor comments on planned capital gains tax overhaul

We take a look at the ramifications of increasing CGT.

The new Office for Tax Simplification review on capital gains tax (CGT) will come as little surprise to many as the government continues to look for ways to cover the enormous costs of the coronavirus pandemic.

Rebecca O’Connor, Head of Pensions and Savings, interactive investor, says: “If CGT is the current target it does suggest that pensions tax relief might now escape the chancellor’s attention, however nothing is likely to be off the table yet – the Treasury has a lot of money to raise from taxes to pay for this pandemic. 

“Tax relief is a huge incentive to save into pensions, however, and without it, people may not save as much, which would ultimately put a greater burden on the state when people retire, without enough to live on.”

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Changes to the CGT regime now appears to be a question of when, not if following the publication of the government-commissioned review. The prospect of raising billions to help pay back the vast sums borrowed to support the economy throughout the coronavirus pandemic by increasing CGT rates to bring them in line with income tax could prove too difficult to resist for the government.

“CGT is arguably an irrelevance for many investors, because of the generosity of the annual ISA and pension allowance (let’s not forget the JISA allowance, either). So, CGT issues could be seen as something of a first world problem, but it’s worth checking to see if you have made use of your tax-free allowances. And if you haven’t, it’s perhaps time to consider a bed and ISA transfer. It means selling investments from your trading account and buying them back within your ISA. We don’t charge on the sale of a bed and ISA instruction, but re-purchase will have charges. Bed and ISA needs to be done in a managed way to avoid CGT on the sale and you are only in a CGT exempt environment once in the ISA.”