Poll: CGT concerns and why you're gifting money to children

Following our recent poll, we discuss fears associated with possible changes to Capital Gains Tax.

With government borrowing escalating to unprecedented peacetime levels this year to help support the economy through the Covid-19 crisis, it is little surprise that Capital Gains Tax (CGT) might be in the Treasury’s crosshairs.

A snap poll of 653 investors by interactive investor, the UK’s second largest direct to consumer investment platform, of website visitors between 25 July to the morning of 28 July 2020, found that 37% are worried about changes to CGT.

But of those concerned, 23% said they worry only because they see it as a sign of higher taxes to come more generally, while 14% cite fears because they make good use of the CGT allowance.

Not everyone is pessimistic, however. Just over a third (35%) of respondents said possible changes to CGT would have no bearing on their circumstances as they make full use of tax friendly ISAs and/or pensions. Meanwhile, 27% remain unperturbed because they are unsure of how changes to CGT will impact their bottom line.

Gifting money to children

Whether as a means to mitigate against the prospect of a higher CGT bill, or to offer financial support during the Covid-19 pandemic, just over one in five (21%) say they plan on gifting money to their children in the near future. Some 8% say they’ll give money to their grandchildren, while 10% of respondents plan to gift both their children and grandchildren. 

In addition, one in five (20%) respondents admitted that they plan on gifting money to their children or grandchildren sooner than they might have expected at the start of 2020.

Gifting money to help fund education – either university education due to Covid-19 financial pressures and or because of reduced job opportunities that would normally supplement living costs or private school fees – was cited by 7% of respondents.

Moira O’Neill, Head of Personal Finance, interactive investor, says: “Fears of changes to CGT mostly stem from the sentiment that it could signal the beginning of higher tax bills more broadly as the government seeks to address unprecedented borrowing before the debt spirals out of control. 

“But it is important not to act to hastily. No changes have been made to CGT as yet and there are far too many options for consideration to pre-empt an outcome. 

“In truth, CGT liability isn’t a problem for the masses. ISAs and pensions can keep your income and capital gains safe from the taxman’s grasp. These boast generous annual allowances of £20,000 for ISAs and £40,000 or the equivalent of their salary – whichever is lower - for pensions. 

“Regardless of the outcome of the review, it makes sense to use as much of those valuable allowances as you can. Those with investments outside a tax wrapper who haven’t fully utilised their tax allowance might want to get cracking with their ‘Bed and ISA’ transfers, shifting money into a tax friendly wrapper, although you might incur CGT, depending on your circumstances.”

On gifting money for education, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Though a minority, it is interesting to see an appetite among respondents to gift money to their children or grandchildren to help foot the cost of education. With many universities shifting to online teaching for the upcoming year, whether university education still represents value for money in the age Covid-19 is likely to be in the minds of many graduating college students ahead of A-level results day in August. 

“A pressing question is can traditional, campus-based universities adapt by choosing the right technologies to effectively educate and engage students? The challenges presented by of remote learning, which is compounded by dwindling job opportunities that would normally supplement living cost at university, could make the prospect of taking a gap year more compelling for some.”