Speculation over capital gains tax (CGT) policy risks driving unnecessary financial decisions, according to advice firm Isio.
With Andy Burnham all but certain to become prime minister in the near future, and facing a continuing mismatch between spending and tax revenue, tax rises are reported to be on the cards.
Where these rises come is far from clear, but CGT is an area Labour has already targeted, and change is seen by some as a possibility.
Mark Campbell, head of wealth planning at Isio, said the speculation that a future Burnham government could align CGT rates with income tax has prompted some investors and business owners to consider bringing forward asset sales before any potential changes.
“It’s worth remembering that we’ve been here before,” he said. “Speculation over potential CGT increases has been something of a Budget tradition in recent years, so this is not a new story.
“The concern is that people may make significant financial decisions based on rumour, rather than confirmed policy.
“We are already seeing some individuals crystallise gains early to pre-empt changes which may never materialise, often leaving them worse off than if they had adhered to their original plans.
“At the same time, such behaviour can bring forward tax receipts for HMRC. The cynic might argue that if speculation alone encourages people to pay tax earlier than planned, it delivers a short-term boost to the Treasury without any formal policy change. If that’s the case, it feels like a very underhand way of increasing revenues.”
Campbell added that to a large extent paying CGT is voluntary as people choose whether they sell assets.
Pushing tax rates too high creates the real risk that individuals defer disposals, reducing transactions, slowing investment and potentially generating less tax than expected, he noted.
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