Murray Beith Murray LLP is a leading Scottish private client law firm.
For 175 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies.
Murray Beith Murray LLP is a leading Scottish private client law firm.
For 175 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies.
With a Capital Gains Tax increase being predicted as part of next month’s Budget, Alec Stewart considers how a fresh tax strategy and taking action now could help you benefit from current rates, in The Scotsman. Read the full article below, republished by kind permission of The Scotsman:
With only 49 days until the new Chancellor, Rachel Reeves, delivers her first Budget statement, we await what is expected to be a “painful” announcement. Detail as to where this pain will be felt is not yet known, however, there have been assurances that Income Tax, National Insurance and VAT will remain untouched.
This dramatically narrows the number of taxes which seem likely to rise, particularly as it is felt that those with the broadest shoulders “should bear the heavier burden”. With other taxes safeguarded, Capital Gains Tax (CGT) and Inheritance Tax (IHT) will struggle to hide from the inevitability of increases.
All of this offers a small window of opportunity to reconsider how assets/ investments are held and enjoyed. Unlike so many other countries, the UK has always enjoyed the predilection for drawing primarily on income, and making sure that capital is preserved at all costs, which possibly comes with a sense of being a longer-term “custodian”.
When it comes to assets like land and buildings, this may be the only option – it is difficult to receive an income from land and pocket any growth in capital value at the same time. However, other assets, such as stocks and shares, should not offer the same dilemma. For too long, many have held their investments, taking only the dividend income whilst watching the capital grow. This ignores two crucial truths:
As the Budget looms, some should ponder on whether the “income taking/capital custodian” approach offers the best outcome.
Who benefits from the traditional approach? Possibly the financial markets and advisers who take a percentage of the capital on an annual basis? Certainly the tax authorities which levy the higher rates of dividend tax for many, and await a larger tax uplift with IHT on the capital (or, at the very least, an uplift in CGT on the gain as anticipated in the Budget).
For many, now might be the time to reconsider how they really benefit from their assets. With CGT rates so much lower than those levied on income it might be a good time to crystallise the gain.
Custodians wishing to pass assets on to future generations might consider extending their generosity by passing assets with lower future tax bills. Admittedly, this could create a tax liability in the short term, but any liability now is likely to be much less than that in the future.
It may also encourage some to wean themselves away from a ‘focus on income generation’, to one of overall real return (ie, a mixture of capital growth and income, after tax and costs), offered by a broader and, frankly, larger market.
Of course, it is always possible that tax rates may go down, but as any investment mantra tells us, things are likely to go up over the longer term
Murray Beith Murray LLP Partner, Alec Stewart is an expert in succession, inheritance, and tax planning, and he is a dual qualified solicitor (Scotland and England/Wales), and also authorised to provide financial advice.
If this article has raised any questions or you would like to discuss your affairs then please call us on 0131 225 1200 or complete our enquiry form.
Murray Beith Murray LLP was established in 1849, as advisors for generations of clients, committed to our values of integrity, expertise and trust. This aim and these values continue to this day, as does our commitment to be here when you need us.
