In a strategic financial move, Next’s CEO, Lord Wolfson, divested £29.2 million worth of shares ahead of the anticipated capital gains tax (CGT) reform in Rachel Reeves’s upcoming Budget. This sale has generated significant attention in the investment community.
New regulatory filings indicate that Lord Wolfson sold 290,000 shares over a four-day period, reducing his holdings in Next by a substantial margin. Before this transaction, his shareholding stood at approximately 1.4 million shares, representing a 1.2% stake in the company valued at about £141 million. Next has refrained from commenting on the sale, which precipitated a 2% decline in its share price.
The sale’s timing has stirred speculation given that Reeves is expected to adjust CGT rates to align more closely with income tax rates in her forthcoming Budget. Presently, higher earners face up to 45% tax on income, while CGT rates are 20% for shares and 24% for property gains. Basic-rate taxpayers are taxed at 10% and 18%, respectively. This potential alignment has led many investors to liquidate assets before any new regulations come into force.
Duncan Mitchell-Innes of TWM Solicitors remarked, “With many expecting CGT increases, we’ve seen a surge in asset sales in recent weeks.” August saw HMRC’s highest CGT receipts since 2008, totalling £197 million, as landlords and investors sought to offload assets in anticipation of the tax adjustments.
This disposal is Lord Wolfson’s third reduction in his shareholding, leaving him with a stake valued at approximately £100 million. This strategy follows a notable 123% rally in Next’s share price since October 2022, attributed to a series of profit upgrades. Earlier this month, Next raised its profit forecast by £15 million, projecting pre-tax profits to approach £1 billion, driven by increasing international sales.
Next has attributed its robust performance to the global convergence of fashion trends, influenced significantly by popular streaming services such as Netflix and TikTok.
Lord Wolfson’s recent sale of a substantial stake in Next highlights the broader trend among investors reacting to potential tax reforms. As the financial community braces for changes in CGT, Next’s strong market performance and strategic foresight underscore the complexities and opportunities in today’s economic landscape.