Private investors reconsider CGT changes

According to the syndicate, private investors who have spread their investments across a number of assets which are not taper relief-driven might in fact come out with larger or similar profits after the 18% flat CGT rate comes in next year.

Hotbed explains that they can do this by ensuring their investment portfolio has a mix of assets such as early stage companies which are EIS-eligible and, therefore, as tax efficient as they have always been, or commercial property investments where tax charges on profits will be cut in many cases from as much as 40% to 18%. Investors also have a number of options available such as SIPPs which allow them to avoid CGT altogether and thus maximise returns on their investments.

Gary Robins, CEO at Hotbed explains: “Although there has been a frenzy of criticism about Darling’s Pre-Budget CGT changes – particularly from the entrepreneur’s point of view – if investors take a closer look they will realise that they might not be as hard done by as they think. Depending on the nature of their individual portfolios they could make the same or even more after-tax profit under the new rules.”

Hotbed adds that if a private investor sits back and reviews his investment portfolio, the standardisation of the CGT rate at 18% might have the effect of increasing the amount of money invested in private equity.

Robins adds: “If investors with money in asset classes such as equities and bonds make bigger profits because of the lowered CGT rate on these assets, it might be that in the interests of a balanced asset portfolio they might allocate more money to invest in alternative assets such as private equity.”