Advisers tell clients to ditch investments that attract CGT

FINANCIAL advisers are telling their clients to ditch investments that will be hit by an impending hike in capital gains tax (CGT).

According to a survey of 204 independent financial advisers (IFAs) by financial technology firm 1st Exchange, 60 per cent are advising clients to steer clear of assets that attract CGT.

The Liberal-Conservative coalition has said it wants to hike CGT on “non business” assets to “rates similar or close to those applied to income”.

That suggests chancellor George Osborne will announce a new 40 or 50 per cent top rate of CGT in an emergency Budget on 22 June, a massive jump from the existing 18 per cent flat rate.

Treasury sources say Osborne is considering a range of reliefs and allowances to soften the blow for entrepreneurs and businesses, although capital gains on second homes, spread betting and foreign exchange trading are likely to be hit.

But there is growing political support for a CGT regime that distinguishes between long-term and short-term capital gains.

John Redwood has proposed a rate of CGT that drops over the length of time that an asset has been held. Under his plans, gains on assets held for a year or less would be taxed in-line with income, most likely at 40 per cent, with that tapering away to a zero per cent rate on gains on assets held for five years or more.

Liberal Democrat peer Lord Lee of Trafford has also written to Osborne, suggesting that assets sold within three years of acquisition should be taxed as income, while long-term gains should be taxed at a 25 per cent rate.