Decide now – and act quick – if you want to beat the CGT hike

Q I have shares worth over £20,000 that I have been looking to cash in for some time now.

There has been much speculation that the government will announce an increase in capital gains tax (CGT) in the emergency Budget on 22 June.

Should I sell my shares now while CGT is still relatively low or postpone selling until after the budget when I know for certain if CGT will increase?

–SM, Inverurie

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A There is indeed a great deal of anticipation about changes that might be brought in by the emergency Budget.

It is true that CGT stands at levels which are low in historical terms.

The possibilities which have been suggested are an increase in the rate of CGT or a significant reduction in the annual exemption which is available, or both.

But all of this is mere speculation at this stage.

If you were to sell now, then you may have the use of any unused annual exemption in the current tax year (10,100) together with any brought-forward losses, and the net gain would be charged to CGT at 18 per cent.

It seems unlikely (but it would not be impossible) that Budget changes would apply retrospectively to any disposals made before 22 June.

If you wait until after the Budget, and there is an increase in potential CGT, it could be that this will take immediate effect, so you may have lost the opportunity to take advantage of the current regime by waiting to see what happens.

Please bear in mind that tax is just one consideration.

Have you sought investment advice on this matter? It may be, for example, that increased pre-budget sale activity could have the result of suppressing prices.

If you do want to trigger CGT now while avoiding losing out through any temporary dip in prices, then you may wish to consider making gifts of the shares instead, to family members (other than a spouse or civil partner).

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This would result in CGT being assessed on the basis of their market price, as if there had been a commercial sale, even though this price would not be paid.

Time is short, however, and any disposals should be effective by Monday 21 June at the latest.

This means that you must have a contract for sale, or a legally binding arrangement for a gift of shares, in place by then.

• Dale Ross is a senior associate within the private client and financial services department of HBJ Gateley Wareing.

• If you have a question, write to Jeff Salway, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail: [email protected].

• The above is for general purposes only and is not tailored for individual use. It does not constitute legal, financial or investment advice on any particular matter and must not be treated as a substitute for specific advice. No action should be taken in reliance of the information given. The Scotsman Publications Ltd and HBJ Gateley Wareing accept no liability on the basis of this article.

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