So the dust has settled and the new UK coalition government has formed, following the hung parliament. The Conservatives and the Liberal Democrats have joined hands and united to become the, amusingly dubbed, ConDem Nation.
As we say goodbye to Labour we say hello to our new leaders and we also prepare to say hello to the changes in policy that will inevitably follow.
In a bid to help reduce the humongous deficit our country is carrying, the new Government is expected to be in the mood for raising taxes. One of the changes we expect, along with others, is a big increase for capital gains tax. The current rate for capital gains tax is 18 percent on amounts over £10,100 each year.
While the details of the proposed increase still haven’t been finalised we do know that the Lib Dems originally planned to wipe out the 18 percent rate and increase it in line with rates for income tax. That would lead to a capital gains tax of 20 percent at the basic level, and those with higher incomes seeing a charge of 40 percent. People whose earnings were in the highest bracket would face an even higher charge of 50 percent.
So what can investors do to avoid paying such large taxes? Here a few measures that may help you along.
If you are carrying losses over from previous years then you can use these to offset new gains, however be sure to declare these losses to the Inland Revenue. You could also transfer your assets to your spouse, if you have one. Under tax law, spouse to spouse transfers are not looked on as a sale, so the gain and the cost is transferred too. Thus you could improve your capital gains exemptions by using two allowances of £10,100. Finally a sure-fire way of avoiding capital gains tax is to invest in products that are capital gains-exempt in the first place. If you make gains on venture capital trusts you will find that they will be completely free of capital gains tax.