Concerns regarding capital gains tax (CGT) are growing amongst financial advisers and investors, research published by Financial Software Ltd (FSL) has shown.

The study, commissioned by The Lang Cat, found that more than 91 per cent of financial advisers felt CGT was a greater concern for them and their clients than it was two years ago.

This comes as speculation mounts about a potential overhaul of the tax regime at the government’s Budget on 30 October.

Growing number of investors are seeking expert advice to protect their assets and avoid being brought into scope, FSL noted.

According to data from The Lang Cat’s Analyser software, 62 per cent of advisers selected CGT tools over the past year when conducting their due diligence and looking for platforms to partner with.

The analysis showed that having a CGT calculator was the top-ranking extra feature out of a total of 600 options, sitting below the vital hygiene factors of having a GIA, ISA, flexi-access drawdown, and access to whole of market.

High-rate taxpayers currently pay a 24 per cent levy on gains from residential property or 20 per cent on other assets, with industry commentators suggesting this could be raised to match income tax, meaning a rate of 40 per cent or 45 per cent.

According to data from HMRC, the number of people paying CGT has increased by 36 per cent since 2019/20 to 369,000.

Meanwhile, the Office for Budget Responsibility (OBR) forecast CGT receipts to rise to £15.2bn in 2024/25 following last year's reduction in the personal allowance from £12,300 a year to £6,000.

With the allowance halved again to £3,000 for the current tax year, the expectation is that CGT receipts will increase further still.

“These findings confirm what we are hearing from our conversations with advisers as more people are being brought into scope for CGT with persistent pressures on the personal allowance,” said FSL MD, Michael Edwards.

“Understandably, many investors will be feeling nervous about potential changes to the regime and how this might impact their assets.

“They will be turning to advisers for their expertise to ensure they maximise all the tax allowances available to them. For this reason, advisers need access to essential tools that provide timely and accurate information.

“This will enable them to recommend the best possible solutions for their clients, ultimately delivering better outcomes.”

Eleven.2 Financial Planning founder, Greg Moss, added: “CGT is definitely going to be a big planning issue for clients and their advisers for the foreseeable future.

“Shrinking allowances have already moved us from a position where most mass affluent clients have few planning needs around CGT, beyond making sure allowances don’t go unused, to us having to be far more hands-on, manging the tax exposure and trading off portfolio structure with tax incurred. Any further moves to increase the tax burden on capital gains will make this need even more acute.

“This is an area where platforms are able to real value over traditional asset managers, who are still generally very poor at providing CGT information for funds held off-platform.

“Advisers are really starting to understand the value of good platform CGT tools to help them do the best job for their clients.

“Some providers seem to understand their important role in facilitating this work, and already provide excellent on-platform tools, some still seem to think it isn’t really their problem.”

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