Sell up to mitigate changes in CGT?
Discussion
My FA has contacted me about potential tax changes, what interests me are the potential changes to CGT, it has been suggested that allowances could be reduced and tax rates aligned with income tax, 20% instead of 10% for lower rate.
One of the suggestions was to realise gains now, use the existing allowance and pay the current rate of CGT, which on the face of it sounds sensible.
Any thoughts?
One of the suggestions was to realise gains now, use the existing allowance and pay the current rate of CGT, which on the face of it sounds sensible.
Any thoughts?
^ my thought is that in a way there is no long term downside to realising gain now ( and paying the CGT 10 % after the small allowance ) since whatever change are coming we can all be sure hat the new rate will NOT be lower than current, the threshold will not be higher . Additionally if in the diminishingly low chance that nothing changes, really one is not worse off as it's just paying some CGT early.
I would echo that this could be an asset dependent question. If it is physical property with a lead time to sell then it may be prudent to act ahead of any potential changes and get the ball rolling. With highly liquid assets (such as shares and funds) then less so.
The truth, of course, is that no one knows what Labour will do, but as has been said any change will only be an increase.
What is important is that you work out your liability at today's rates first. This is give you an indication of the cost of selling down now against different models for future rates. When you know the cost in pounds and pence you get far more perspective on the matter and a doubling of the rate (as a wild example) may have a different impact on you than you would have otherwise considered.
Remember also that a change in rates is only ever applicable if you sell whilst those rates apply. They do not impact on you if you have no plans to dispose of the gains and so a shocking headline may not even apply to you in any event.
As always, where you can share allowances you should be looking at doing so in any event.
The truth, of course, is that no one knows what Labour will do, but as has been said any change will only be an increase.
What is important is that you work out your liability at today's rates first. This is give you an indication of the cost of selling down now against different models for future rates. When you know the cost in pounds and pence you get far more perspective on the matter and a doubling of the rate (as a wild example) may have a different impact on you than you would have otherwise considered.
Remember also that a change in rates is only ever applicable if you sell whilst those rates apply. They do not impact on you if you have no plans to dispose of the gains and so a shocking headline may not even apply to you in any event.
As always, where you can share allowances you should be looking at doing so in any event.
muscatdxb said:
If you have a big gain it has to be tempting to lock in a lower rate of tax whilst you can.
I believe that CGT dies with your estate, so inheritance tax planning comes into it.
I'd like to sell some of my shares but the CGT implications are too serious. I purchased the shares through my ex employer's ESPP over several years at an average purchase price of about $24. Today's value per share is nearly 10x that average price! (Nice problem, maybe). So, I am holding on to them to pass on via my Will in the not too distant future and I hope (me and my beneficiaries) that the current price reset provisions for CGT on death will remain unchanged.I believe that CGT dies with your estate, so inheritance tax planning comes into it.
R.
muscatdxb said:
If you have a big gain it has to be tempting to lock in a lower rate of tax whilst you can.
I believe that CGT dies with your estate, so inheritance tax planning comes into it.
CGT does indeed die with your estate, what is the betting that Labour change this?I believe that CGT dies with your estate, so inheritance tax planning comes into it.
My 94 year old mother is already facing an inheritance tax bill of perhaps 800,000 pounds.
As she pays tax at the highest marginal rate, in Scotland, CGT could be charged at 45%, then inheritance tax at 40 % on the amount left over - an overall tax rate of 66%.
I gave Kier Starmer the benefit of the doubt for a couple of days, he is turning out to be typical Labour.
Fortunately I am domiciled in New Zealand, everything in a trust and inheritance tax at zero.
We kicked out the worst (Labour) government in history a few months ago - even writing the name Jacinda Ardern makes me want to puke.
Markets at an all time high and CGT rate on investments at an all time low, so it's one of those Clint Eastwood decisions,
You've gotta ask yourself one question, "do I feel lucky?" Well, do ya, punk?
Old timers need to watch out because there's no point paying unnecessary CGT and then shortly having their estate hit by IHT as well.
You've gotta ask yourself one question, "do I feel lucky?" Well, do ya, punk?
Old timers need to watch out because there's no point paying unnecessary CGT and then shortly having their estate hit by IHT as well.
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