Londoners faced with £437m hike in CGT bills – 30% of the additional bill

Press release featured in CityAM.

London and Home Counties investors will be the hardest hit by the increase in the rate of capital gains tax (CGT) announced at the recent Budget. Investors in London face a £430 million rise in their CGT bills. Those in the South East (excluding London) will pay an extra £306 million.

The Chancellor Rachel Reeves increased the basic rate of CGT from 10% to 18% in line with residential property tax in October’s Budget. For those with incomes of more than £50,270 the tax on capital gains has increased from 20% to 24%.

The Government has estimated it will raise an extra £1.44 billion, in the first full year following the changes in the Budget. This coupled with a reduction on the tax-free allowance from £12,300 to £3000 over the last two years will have a major impact on individuals whose invest in assets that are geared towards capital gains (such as growth shares) rather than income such as bank interest.

Phil Kinzett-Evans, partner in our Newbury office, says that the increases to CGT in the Budget will be hitting taxpayers very differently in different parts of the country. For example, London and the South East account for 30% of the extra tax revenue.

One of the problems with increasing CGT is that 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.

Another problem with increasing CGT is that it 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 economy activity is stalling

Residents of Kensington and Chelsea will bear the biggest share of the increase in CGT any area in the UK – an estimated £108 million rise in their CGT bill. Investors living in Elmbridge, Surrey – sometimes called ‘the Beverely Hills of the UK’ – will pay an extra £21 million in CGT.

Investors looking to avoid the rise in CGT should consider moving some their investment 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 if they want to avoid heft bill increases as that will give them protection from tax on future capital gains.

Places where residents face the biggest CGT hikes