Anyone thinking of cashing in shares received from flotations such as the Irish Permanent, Norwich Union or Irish Life in the coming months should think carefully about the timing.
The capital gains tax rate was reduced from 40 per cent to 20 per cent in the Budget - with immediate effect - meaning significant benefits for those liable to the tax.
But investors also need to consider carefully the other changes in the capital gains tax regime. From next April, the thresholds for the tax will change.
At the moment, a single investor can incur gains of £1,000 before becoming liable and for a married couple a threshold of £2,000 applies. But from next April the threshold will fall to £500 per person.
Crucially, unlike the current regime, the £500 threshold is not automatically doubled for a married couple. So if all the shares are held in the name of one spouse, then the £500 threshold applies and tax is payable in all amounts above this total. This means that from next April, many smaller investors will be brought into the net for the first time.
It also means many investors may consider moving the shares into joint names or giving half of them to a spouse to avail of the full thresholds held by both. Stamp duty of £10 is the only charge which should apply when making such a change.
Those who sell their shares before next April will benefit from both the cut in the rate and the existing threshold. But once the new tax year starts, many of those who benefited from the flotations will find that they are liable for capital gains tax, albeit at a lower rate.
See also pages 2, 3 & 4
