Over one in three (35%) wealthy investors have sold investments or will do ahead of the Budget due to worries about increases to capital gains tax (CGT), Wealth Club has revealed.

The non-advised investment service’s study of 506 of its clients, with an estimated average wealth of £3.15m, found 24% have already sold investments to avoid potentially higher rates, while a further 11% plan to sell before the Budget later this month.

Pre-Budget speculation has raised the prospect of CGT rates of 24% being increased to match income tax rates of up to 45%, with the possibility of smaller increases to CGT rates also being considered.

Wealth Club’s study also found a further 27% of wealthy investors have considered selling investments but decided against it, while 33% say they have not considered selling ahead of any possible CGT increase.

Around 5% say selling is not applicable for them.

The firm said if a “significant” increase in CGT is announced, the research shows it will have a major impact on the behaviour of wealthy investors making them more likely to hold on to investments on which they have made large gains.

Two in five (41%) say if CGT increases significantly, they will be much less likely to sell investments, while 15% say they would be somewhat less likely to do this.

Wealth Club said not all wealthy investors would hold on to investments however, with 19% saying a CGT rise would make no difference to their decision making, while 11% say they would be more likely to sell.

Founder and CEO at Wealth Club, Alex Davies, stated: "Pre-Budget rumours and speculation about major increases to CGT are driving a wave of selling of investments by wealthy investors, and if a rise is implemented, it could lead to investors holding on to investments for longer than they would normally want to in order to avoid higher bills.

"The net impact of a rise in CGT rates could mean the Treasury raising less revenue as a result of a measure intended to boost receipts. More importantly perhaps an increase in CGT rates could have the effect of making the UK a less attractive place to invest with the knock-on effects on economic growth and employment.

"Governments have to make decisions on revenue and face a wide range of challenges but the impact on investor behaviour of a major rise in CGT would not deliver the results."

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