One in three wealthy investors plan to sell to avoid CGT

Over one in three (35 per cent) wealthy investors have sold investments or will do ahead of the Budget due to worries about increases to capital gains tax (CGT), Wealth Club has revealed.

The non-advised investment service’s study of 506 of its clients, with an estimated average wealth of £3.15m, found 24 per cent have already sold investments to avoid potentially higher rates, while a further 11 per cent plan to sell before the Budget later this month.

Pre-Budget speculation has raised the prospect of CGT rates of 24 per cent being increased.

Wealth Club’s study also found a further 27 per cent of wealthy investors have considered selling investments but decided against it, while 33 per cent say they have not considered selling ahead of any possible CGT increase.

Around 5 per cent say selling is not applicable for them.

The firm said if a “significant” increase in CGT is announced, the research shows it will have a major impact on the behaviour of wealthy investors making them more likely to hold on to investments on which they have made large gains.

Two in five (41 per cent) say if CGT increases significantly, they will be much less likely to sell investments, while 15 per cent say they would be somewhat less likely to do this.

Wealth Club said not all wealthy investors would hold on to investments however, with 19 per cent saying a CGT rise would make no difference to their decision making, while 11 per cent say they would be more likely to sell.

Wealth Club founder and CEO, Alex Davies, stated: "Pre-Budget rumours and speculation about major increases to CGT are driving a wave of selling of investments by wealthy investors, and if a rise is implemented, it could lead to investors holding on to investments for longer than they would normally want to in order to avoid higher bills.

"The net impact of a rise in CGT rates could mean the Treasury raising less revenue as a result of a measure intended to boost receipts. More importantly perhaps an increase in CGT rates could have the effect of making the UK a less attractive place to invest with the knock-on effects on economic growth and employment.

"Governments have to make decisions on revenue and face a wide range of challenges but the impact on investor behaviour of a major rise in CGT would not deliver the results."

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