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A mix of policies can be used to protect against a range of eventualities:. Some can be combined with investment elements. Using the right combination makes them more cost-effective.

Budget Day: 22 June 2010

The UK’s first Coalition Government in 70 years is now in place and the spotlight moves onto the measures most likely to be taken by them to tackle the formidable financial pressures facing the country

“The Coalition: Our programme for Government” sets out these measures under what they call a programme for partnership government.  Chancellor George Osborne announced that their first budget will be held on Tuesday 22 June 2010 and it is widely anticipated that part, if not all, of the taxation measures outlined in Section 29 of the Coalition Agreement will be announced.

Section 29 states “We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.”

It is clear, therefore, that Capital Gains Tax (CGT) is going to rise under the new Government’s proposals.  The current CGT rate is 18% which means that the rate could more than double to 40% or even 50% to bring it into line with current Income Tax rates. 

The timing of the proposed change is uncertain but it is possible that the change could be introduced on Budget Day, 22 June 2010, backdated or even set to take effect from 6 April 2011.

It is our view that it is wisest to be prudent and investors showing gains on stocks and shares, Unit Trusts or other investment assets or properties consider their position now in order that they can take action before the emergency budget now just a month away.

A further point to note is that it is possible that these increased rates could be in place for the next five years at least as it is the Coalition’s intention to make the present Government last that long.  The result is that there could be a rush of investors holding substantial portfolios of property, shares or other assets who have not protected them in tax shelters such as Trusts, ISAs or pensions who face the unpalatable thought that up to 50% of the gains, which could have built up over a long period, will now be sacrificed to HMRC.

The above proposals constitute what is a dramatic increase in taxation which is likely to significantly impact upon individuals (and Trustees) who hold capital assets and who have not considered the use of tax avoidance strategies before.  Our advice is to review matters as soon as possible and consider what options are available to seek protection and investigate tax saving opportunities. 

This article represents our interpretation of current and proposed legislation and HMRC practice as at the date of publication. These may change in the future.