By ANDREW CORNWELL 12/05/2010
As part of a package of tax reforms agreed by the new Conservative-Liberal Democrat coalition government, capital gains tax (CGT) is expected to rise significantly.
The current rate of 18% is expected to rise close to the 40% higher rate of income tax. This is likely to apply to investments in non-business assets only, which includes items such as shares and second homes. Shares in personal companies would be exempt from the tax rise.
The increase in the rate of CGT will have a significant impact on those investors who have been looking for ways to supplement their income in this low interest rate environment, and have used capital gains as a tax efficient means to do so. This has been through either growth investments such as shares or specific products, such as zero dividend preference shares.
Investors seeking income or growth should look to use their full ISA allowances (£10,200) and other tax efficient wrappers such as pensions, venture capital trusts (VCTs) or enterprise investment schemes (EISs). VCTs and EISs are higher risk and illiquid investments, and are not suitable for all investors.
For more information you can download the following Bestinvest guides:
Investing for Income
VCT Guide 2010
Tax Shelter Guide 2010/11
If there is anything you wish to discuss regarding this article please call one of our Investment Professionals on 020 7189 9999.