Yahoo News London and Home Counties hardest hit by huge capital gains tax burden
London-based investors and those from the Home Counties are poised to be the most affected by the upcoming rise in capital gains tax in April, prompting advice from a top accountancy firm to shift assets into more tax-efficient schemes.
UHY Hacker Young, accountants, have provided data exclusively to City AM that taxpayers in the capital are expected to shoulder an additional £430m in capital gains tax (CGT) this year, comprising 30% of the total increased revenue, as reported by City AM.
Neighbouring counties such as Buckinghamshire, Surrey, and Hampshire are also set to contribute substantially, with an additional £306m forecasted.
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In her initial Budget delivered towards the end of last year, Chancellor Rachel Reeves chose to increase both the lower and higher rates of CGT. Basic-rate taxpayers, earning up to £50,270 annually, are now subject to a CGT rate of 18%, a jump from the previous 10%.
Higher-earners will experience an increase from 20% to 24% in their CGT when the changes take effect in April.
Phil Kinzett-Evans, a partner at UHY Hacker Young, heavily criticised the tax increases, suggesting they could hinder economic growth and reduce market liquidity. "One of the problems with increasing capital gains tax is that it discourages investors from investing in UK growth companies that are listed on the stock market – exactly the kind of investment we need to see more of in the UK," he stated.
"It [also] forces investors to consider holding on to assets rather than liquidating them, locking up money that would otherwise fuel the economy at a time when economic activity is stalling."
The study, conducted through a series of Freedom of Information requests, revealed that residents of Kensington and Chelsea will be hit hardest by the increases, facing an additional £108m in CGT this year. This figure is more than double the expected receipts from the next highest council, which UHY Hacker Young predicts will be Westminster with an extra £53m in capital gains tax contributions.
The significant rise in CGT liability has prompted Kinzett-Evans to advise investors to contemplate transferring some of their assets into tax-efficient vehicles. "Taxpayers who are investing for capital gains earnings should consider moving those shares into SIPPs [self-invested personal pensions] and ISAs [individual savings accounts] if they want to avoid hefty bill increases as that will give them protection from tax on future capital gains," he stated.
