76% of advisers say CGT support is impacting platform choice

Capital Gains Tax (CGT) functionality and support given to advisers via platforms is influencing their platform selection and due diligence, according to new research from tax reporting experts Financial Software Ltd.

As speculation around changes to the CGT regime ramps up ahead of the Budget, the majority (76%) of the 130 advisers polled have said that the support offered to them is impacting which providers they’re choosing to work with.  

The research by the lang cat, commissioned by Financial Software Ltd, also shows that more than 91% reported that CGT is of greater concern for them and their clients compared to two years ago.

This comes as more people are being pulled into CGT scope with the latest statistics from HMRC showing that since 2019/20, numbers paying the tax have risen from 272,000 to 369,000, representing a 36% increase. Alongside mounting media speculation, the Institute for Fiscal Studies (IFS), among others, has called for major reform of the tax to make it ‘more fair and growth friendly’.

To support their work with clients, two thirds (66%) of advice firm respondents said a CGT calculator is 'essential' and a further 19% said it was 'important'. CGT functionality that includes assets’ book cost (where assets’ original cost is listed) is also considered essential by 63% and important for almost a third (30%). 

Further data and analysis from the lang cat’s Analyser software backs this up. Over the past year, two thirds of advice firms (62%) selected CGT tools when conducting their due diligence and looking for platforms to partner with. The analysis shows that having a CGT calculator was the top-ranking extra feature out of a total of 600 options, sitting below having a GIA, ISA, flexi-access drawdown, and access to whole of market.

Michael Edwards, managing director at Financial Software Ltd, said: “We know that CGT is a growing issue for more investors so advisers want to provide the very best support to their clients. This means providing them with accurate and timely insights to ensure they maximise all the tax allowances and exemptions available. As we head towards the Budget, speculation around what might happen to CGT is creating more uncertainty, so advisers are likely to be under additional pressure to reassure clients that their assets will be protected.”

Gareth Hope, head of research at Wren Sterling, added: “With the expectations of increases to Capital Gains Tax rates ahead in the October Budget, and the near extinction of annual exempt amounts under the previous Government, then the challenges of CGT planning are only set to continue. Part of our job is to help clients steer through these challenges, and that is almost impossible without good reporting and tooling to show the options beforehand, and aid reporting afterwards.

“CGT planning and reporting tools should now be a hygiene factor for platforms, and anyone that hasn’t paid their tool (if they have one) the love it deserves in recent years, may start to find that advisory businesses actively choose against it for both new clients, but also clients already on the platform.

“The lack of data that is ported with provider switches only serves to disadvantage clients and their planning and I’d support any cause that sought to make that a mandatory part of the provider switch process.”