The value of recovered, unpaid CGT is staggering, so why do platforms not help out more?

Advisers are regularly being left disappointed by the lack of long capital gains tax (CGT)  support from their platforms, according to new research.

A report by tax software company FSL found more than two thirds of platforms are not providing advisers with holistic CGT planning support.

This is despite CGT reporting being an issue they are having to deal with daily, according to the research.

There are a number of areas in which advisers reported being frustrated with the inadequacy of their platforms when it comes to CGT.

Fewer than a third of platforms provide tax tools that enable advisers to include off platform assets in their financial plans for clients, for example.

This is despite more than one in four advisers (27%) viewing this as important functionality.  

The same research shows that the same number of advisers (27%) view scenario planning tools as absolutely ‘must have’ features, yet one in four platforms don’t provide them either.   

Greg Moss, director at 11.2 Financial Planning, said: “CGT planning has become a major issue for the majority of our clients and is a big part of our service and advice process.  

“Changes to allowances in particular have meant many clients now have an ongoing need to plan their disposals and exposure to CGT, and as advisers, we need good, reliable tools to help us with this.  

“Platform functionality is still very variable. Good CGT reporting functionality is a key part of our platform due diligence because it is so embedded in our periodic review process.”  

Capital gains tax stands out as a widely misunderstood area of financial planning, with only 22% of people fully aware of the personal impact, according to separate research by Schroders Personal Wealth (SPW), which points to a significant need for average investors to turn to advisers.

A separate study from the lang cat shows the recent changes to CGT announced during the Autumn Budget are impacting nearly half (48%) of advice firms.  Nearly a quarter said this impact was sizable.    

Michael Edwards, managing director at FSL, said: “We’re not surprised to see advisers are increasingly concerned about how CGT is impacting their work and clients’ portfolios, especially post-Budget.  

“With the government wanting to raise more revenue, and further hikes to CGT not being ruled out in the next autumn statement this means more demand on advisers’ time.”

Changes made to CGT during the Autumn Budget 2024 include an increase from 10% to 18% at the lower rate, and 20% to 24% at the higher rate.  

This change came into force immediately, meaning anyone who had sold assets with gains on the morning of the Budget (30 October 2024), will fall into the new rates.

More people are being pulled into CGT scope. The latest statistics from HMRC show that since 2019/20, 36% more people are paying the tax.  

At the same time, investigations into unpaid CGT liabilities more than tripled to 14,223 in the 2023-24 tax year as HMRC cracked down on investors.  This generated £202.4 million in recovered tax – an increase from £180.8m in the previous year.    

CGT functionality and support given to advisers via platforms is influencing their platform selection and due diligence.

The majority (76%) of the 130 advisers polled by FSL have said that the support offered to them is impacting which providers they’re choosing to work with.  A CGT calculator now sits among features like having a GIA, ISA, Flexi-Access drawdown, and access to whole of market as essential when picking a platform.

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