Tax hike fears trigger asset sell-offs

Investors brace for capital gains tax increase. This "frenzy" of activity comes as concerns mount that the Labour administration will increase taxes to address a £22 billion shortfall in public finances.

Wealth managers and tax experts say fears of a capital gains tax hike in the upcoming October Budget have triggered a surge in asset sales among business owners, property investors, and shareholders.

In August, Prime Minister Keir Starmer indicated that Labour will likely raise taxes, a move designed to plug the budget deficit. This potential increase in capital gains tax has alarmed asset owners, especially since Labour ruled out raising national insurance, income tax, or VAT in the run-up to July’s general election.

Capital gains on assets such as businesses, second homes, and shares are taxed at rates ranging from 10 to 28%, significantly lower than income tax rates between 20 and 45%.

Advisers report that clients are selling assets to external buyers and exploring alternative strategies, such as selling into family trusts or gifting assets to younger generations.

Those concerned about potential changes to the inheritance tax system, including the possibility of a cap or the elimination of certain tax reliefs, are also considering these measures. This pre-emptive activity highlights the growing uncertainty among UK investors as the October Budget approaches.

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