Fears of rise in UK capital gains tax trigger selling ‘frenzy’

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Fears that the UK government will raise capital gains tax in its October Budget are driving a “frenzy” of activity by business owners, property investors and shareholders, according to wealth managers and tax experts.

Earlier this week Sir Keir Starmer gave the strongest signal yet that the Labour administration will raise taxes to close a £22bn “black hole” in the public finances at the October 30 budget.

“There’s a Budget coming in October and it’s going to be painful,” Starmer said in a speech on Tuesday. “Those with the broadest shoulders should bear the heavier burden.”

Several advisers said their asset-owning clients were worried about potential increases in capital gains tax — particularly as Labour ruled out raising national insurance, income tax or VAT in the run-up to July’s general election.

“It is a frenzy”, said Tim Stovold, partner at Moore Kingston Smith, an accountancy firm, who reported inquiries about selling assets, due to worries about tax rises, had rocketed since the election.

Capital gains on assets including businesses, second homes and shares are currently taxed at between 10 and 28 per cent — lower than the 20 to 45 per cent levied on income.

Miles Dean, partner and head of international tax at Andersen, said his clients with real estate, company shares and crypto assets — had been pushing to sell them and pay tax at the existing rates for at least 18 months — “ever since it became clear that Labour were going to get into power”.

Nimesh Shah, chief executive at advisory firm Blick Rothenberg, said the prime minister’s statement had prompted a “significant number of queries in the last 24 hours”.

Several clients who own businesses were pushing “through business sale transactions way in advance of when they would have, with an urgency to complete”, added Ian Cook, financial planner at Quilter Cheviot. Share portfolio investors were making use of the ability to sell shares and rebuy them in what is known as “bed and breakfasting”.

Cook said he also knew of a number of property investors who were in the “throes of liquidating property portfolios”. Most of them had started selling down their assets as soon as the new government was confirmed. Investment properties owners who had not yet started selling would find it difficult to complete before the October Budget, Cook warned.

“For both property owners and entrepreneurs, there’s a lead time. You don’t put it on eBay and then it’s gone in a week,” he said.

Advisers reported that as well as selling to external buyers, clients were disposing of assets in other ways such as selling into family trusts or gifting assets to younger generations. The latter mechanism was also being used by people concerned there would be changes to the inheritance tax system, such as a capping or scrapping of certain tax reliefs.

Clare Munro, a tax adviser at Weatherbys Private Bank, said there had “definitely been some concern” from clients about both potential capital gains tax and inheritance tax changes and this had led some to take action.

However, she warned that there were risks around making short-term selling decisions, including any rumoured tax changes not coming to fruition or losing out on potential growth from hold assets over the long term.

Stovold agreed that some people were “losing their common sense” and looking at accelerating sales of assets that they had intended to hold for at least the next 10 years. He added that there would be tax raising benefits for the government of letting the CGT “rumours run rife”.

Overall the uncertainty was unhelpful for businesses and their owners, said Mike Hodges, partner at accountancy firm Saffery.

“Causing people to act in haste doesn’t feel like the best way to create the confidence and stability around the tax system that will encourage people to invest,” he said. “With two months still to go until the Budget, we don’t want to encourage a fire sale mentality.”