British investors withdrew nearly £1 billion from UK-focused stock funds in October, acting pre-emptively to avoid increased capital gains tax rates announced in Rachel Reeves’ autumn budget.
Data from Calastone, the world’s largest funds network, revealed stock sell orders surged 36% to £17 billion in the month leading to October 29. The significant movement suggests investors were actively crystallising profits before the chancellor’s tax modifications took effect.
The budget announcement outlined an increase in the higher rate of capital gains tax on shares from 20% to 24%, while the lower rate jumped from 10% to 18%. These adjustments formed part of a broader £40 billion tax rise package, pushing the UK’s tax burden towards historic highs.
Edward Glyn, head of global markets at Calastone, noted the distinctive behavioural shift, with sell orders dropping 40% immediately after the budget announcement. The dramatic change in trading patterns strongly indicated tax considerations were driving investor decisions.
Net outflows from equity funds reached £2.71 billion in October, marking a record for the month. UK-specific equity funds accounted for £988 million of the exodus, while equity income funds with substantial UK market exposure saw £733 million withdrawn. The trend continues a pattern of consistent outflows from UK equity funds observed since May 2021.
Fixed income funds emerged as a beneficiary, attracting £631 million in October – the largest increase since June 2023. The shift reflected rising bond yields and adjusted expectations regarding the pace of interest rate changes from both the US Federal Reserve and the Bank of England.
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