Budget blues for Traders

Thursday, 24th June 2010 15:12 - by Robbie Burns

Does the ‘Emergency Budget’ mean anything to Investors and Traders? Of course, that was my first selfish thought! The main thing is the rise to 28% in Capital Gains Tax (CGT). It means if you're a top-rate taxpayer, you'll end up paying 28% tax on any profit on your market dealings over £10,000 in the tax year. Quite why we should have to give the Government a slice of our share profits is a mystery to me. Perhaps they should also give us 28% on anything we lose? Maybe they should share our pain... There are two main legal ways still to avoid CGT. Firstly, ISAs (Individual Savings Account): You can now put in £10.2k a year. And of course, (as long as you have a strong relationship) you could use your partner's allowance too. All gains inside ISAs are tax free, but you can only put main market shares into ISAs and a small number of AIM (Alternative Investment Market) shares that are dual listed. The second way to avoid tax is to combine using ISAs with spreadbetting. Spreadbetting is also CGT free. Here's how I play it: I use my ISAs to trade the main market companies and spreadbetting to buy and sell the smaller AIM companies. This way, I can maintain all my trading Capital Gains Tax free. I can then also buy and sell shares outside those two tax-free ways up to my £10,000 CGT allowance, which wasn't changed in the Budget. I was disappointed they didn't decide at last to allow all AIM shares to go into ISAs. I don't see why AIM shares aren't allowed in ISAs tax-free. It seems a silly anomaly, especially when so many AIM companies are actually quite large. I'm also disappointed they didn't encourage longer-term saving by abolishing CGT on shares held for over 3 years. My personal view is Investors who have larger sums to play with are crazy if they don't use ISAs and spreadbetting to avoid CGT. So, if you're not using either, do investigate them! After all, while I'm sure you won't mind helping the country out with its debt...perhaps you wouldn't mind keeping some of your profits out of the hands of the taxman! For more from Robbie, please check his website www.nakedtrader.co.uk ...and don't forget www.lsespreads.com for all your SpreadBetting needs!