# Investors often ignore capital gains tax, but should consider selling now to avoid a higher future tax
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-03-08
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Potential Increase in Capital Gains Tax in Tomorrow’s Budget
Meta Description: Get expert insights from Private Client Partner Phil Cook at Thomas Miller Investment on the potential rise in capital gains tax in the upcoming Budget. Learn
URL: https://financedigest.com/investors-often-ignore-capital-gains-tax-but-should-consider-selling-now-to-avoid-a-higher-future-taxhtml

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**_Phil Cook_** **_,_** _Private Client Partner at Thomas Miller Investment, comments on the potential increase in capital gains tax_

“With the Chancellor considering raising taxes to provide parachute funding for Social Care this year, it is likely he may increase capital gains taxes in tomorrow’s Budget.  The Conservative Government has guaranteed that they will not raise income tax, VAT and national insurance until 2020 and these measures are enshrined in law.  This leaves few areas where reasonably significant sums can be raised.

“Capital gains tax was reduced from 6 April 2016 from 28% to 20% (14% to 10% for basic rate taxpayers) for many investments, excluding property and [private equity](https://www.financedigest.com/can-private-equity-do-for-africas-manufacturers-what-its-done-for-f1-and-rugby.html "Can private equity do for Africa’s manufacturers what it’s done for F1 and rugby?") carried interest.  Following the changes introduced by George Osborne last year, it is not inconceivable that the new Chancellor will seek to either bring these into [line with one higher blended rate or build on the trend](https://www.financedigest.com/plastic-caps-screw-caps-closures-in-demand.html "Plastic Caps & Closures Witness Strong Sales in Line with Convenience Packaging Trend; Screw Caps & Closures in Demand") and target particular sectors with increased rates.

“This is set against a background of significant increases in most [stock markets](https://www.financedigest.com/yes-winning-the-euros-really-can-help-your-stock-market.html "Yes, winning the Euros really can help your stock market") over the last year, which leaves many investors sitting on uncrystallised gains on their investment portfolios. Traditionally, gains in portfolios are managed over a long period of time using personal allowances and [losses on other holdings to offset](https://www.financedigest.com/ftse-100-up-as-astrazeneca-gains-offset-commodity-losses.html "FTSE 100 up as AstraZeneca gains offset commodity losses") gains.  This can take many years and restrict changes to portfolios.

“With the [recent rise in markets](https://www.financedigest.com/most-recent-development-report-on-centrifugal-chiller-market-to-witness-exponential-rise-in-revenue-share-during-the-forecast-period-2021-2031.html "Most Recent Development Report On Centrifugal Chiller Market To Witness Exponential Rise In Revenue Share During The Forecast Period (2021-2031)"), lower rates on gains for these investments and the potential of future increases, we believe that investors should consider selling now to realise capital gains on this tax year.

“This will allow portfolios to be restructured, [banking gains and potentially providing protection against a future drop in markets](https://www.financedigest.com/the-stem-cell-banking-market-to-keep-up-the-digitized-momentum.html "The Stem Cell Banking Market to keep up the digitized momentum").  The cost is capped at 20% of the gain, reduced to 10% for basic rate taxpayers (up to the [higher rate](https://www.financedigest.com/uk-house-prices-fall-by-most-since-2009-higher-rates-to-bite-nationwide.html "UK house prices fall by most since 2009, higher rates to bite-Nationwide") income tax threshold), after personal allowances of £11,100 have been used.

“A debate about an acceptable level of tax is unlikely to reach a simple conclusion.  That said, we rarely have any requests to mitigate [income tax](https://www.financedigest.com/freelancing-finances-managing-income-and-taxes-as-a-freelancer.html "Freelancing Finances: Managing Income and Taxes as a Freelancer") liabilities on the basic rate of 20%.  If 20% income tax is generally seen as a reasonable level, there is a strong argument that this [view should also apply to capital gains](https://www.financedigest.com/oil-struggles-to-hold-gains-amid-mixed-demand-view.html "Oil struggles to hold gains amid mixed demand view"). [Tax at 20% of a gain may not be a small figure but, in relative terms, the level of tax is historically low and we feel it is an acceptable cost to enable a fresh](https://www.financedigest.com/poland-to-launch-fresh-tax-cuts-in-anti-inflation-drive.html "Poland to launch fresh tax cuts in anti-inflation drive") start for a portfolio.  This is likely to remain the [case if there are no changes announced to capital gains](https://www.financedigest.com/bone-densitometers-market-to-gain-momentum-owing-to-increasing-cases-of-bone-disorders-especially-among-geriatric-population.html "Bone Densitometers Market To Gain Momentum Owing To Increasing Cases Of Bone Disorders Especially Among Geriatric Population") tax in the Budget.”


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