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Some rich individuals in the UK are selling assets such as shares and property in preparation for an incoming Labour government that they fear would increase capital gains tax, according to several wealth managers.
Financial planners representing wealthy people told the Financial Times that some clients, from corporate chief executives to business entrepreneurs, were already offloading investments.
Shadow chancellor Rachel Reeves has said her party has no plans to raise CGT, but she has refused to rule out increasing the levy during a Labour government’s full term.
Several wealth managers said “lots of clients” had been in contact with questions about a possible CGT increase. For higher or additional-rate taxpayers, the tax is levied at 20 per cent on gains made from selling assets, although property is taxed at up to 24 per cent.
Toby Tallon, a partner at wealth manager Evelyn Partners, said some of his clients were “taking action now to sell assets”, especially those who needed cash soon, while others were “sitting tight for now, pending the results of the election” on July 4.
He added that the clients selling shares were “people who already had plans to sell something in the short to medium term and it was just a question of when”.
Nick Ritchie, a senior director at RBC Wealth Management, said there was “a general nervousness [around] the silence on CGT”. He added that a minority of clients were already selling assets to ensure their gains were taxed “at a favourable 20 per cent”, while others were taking a wait-and-see approach.
Ritchie warned that some wealthy individuals were considering moving overseas, and several would “seriously be exploring moving offshore and becoming non-resident” if CGT were to be significantly increased.
“That’s a worrying trend; you could see a brain drain of people who are building businesses, creating jobs and have already paid significant amounts of tax in the UK,” he added.
Although Labour has committed to not raising taxes on “working people”, such as national insurance, income tax or VAT, the party has left the door open to changes to other taxes, including CGT. The Conservative party said in its manifesto that it would not increase CGT.
Ian Cook, a chartered financial planner at wealth manager Quilter Cheviot, said: “Buy-to-let owners are actively selling. The people most concerned are the multiple-property owners, as a sale might take months.”
Other wealth managers have warned about the effects of a CGT increase on the broader economy. Andrew Shepherd, chief executive of wealth manager Brooks Macdonald, said it could “potentially discourage investment in UK plc at a critical time for the economy”.
He added: “We always see a rise in client calls during general election periods, as people seek advice on how new policies might impact their financial plans.”
Labour said: “Nothing in our plans requires any additional tax to be increased. We have set out fully costed, fully funded plans, with very specific tax loopholes we would close.
“We have said very clearly that our interest isn’t in raising taxes — our priorities are economic growth and making working people better off.”
Additional reporting by Jim Pickard
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