YOU have two months before the new stealth taxes come in. We explain what is at stake.
Who will lose out after the capital gains tax revamp? Investors with AIM stocks and about 270,000 people in save-as-you-earn employee-share schemes. These are classed as business assets, so top-rate taxpayers paid only 10% once they had owned the shares for two years, while basic-rate taxpayers paid 5%. From April everyone will pay 18%. The new rules do not affect investors with share-incentive plans.
Long-term investors with assets purchased before 1998 could lose out due to the abolition of indexation allowance.
How does indexation allowance work? It removes some or all of the taxable gain on assets held between April 1, 1982, and March 31, 1998. You work it out by multiplying the amount you spent by the indexation factor on the Revenue's website (hmrc.gov.uk ) under "Rates and Allowances - Capital Gains".
With taper relief, which applies to all gains made since April 1998, the longer you hold an asset, the lower the rate of CGT you have to pay.
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After three years of holding a nonbusiness asset you pay CGT on 95% of the gain; after a decade you pay tax on 60%. For example, a higher-rate taxpayer who sold a basket of shares after less than three years would pay 40% tax. After four years, the tax rate would drop to 38% and after 10 years to 24%. If you sell up on or before April 5 you can claim both sets of allowances if you have held an asset for 10 years or more.
Is it easy? If you are transferring shares, investment funds or savings accounts ask your broker, investment manager or bank to move the funds into your spouse's name. With property you can sign a declaration of trust, which spells out the proportion of the property a husband and wife own.
Is it still worth setting up a trust? Lifetime gifts into trust are subject to IHT only above the nil rate band - currently £300,000. Lawyers therefore recommend that wealthy people who have more than £300,000 to give away start planning as soon as possible.