Managing Capital Gains Tax more effectively with Rathbones Model Portfolio Service

19 September 2025

A smarter structure to reduce unnecessary crystallisation and simplify planning.

The sharp reduction in the annual exempt amount for capital gains tax (CGT) has prompted fresh scrutiny of how portfolio changes affect clients, especially those with general investment accounts. The structure of the re-launched Rathbones MPS helps mitigate many of the issues advisers face when it comes to CGT, offering a cleaner, more controllable way to manage risk and return.

Article last updated 24 October 2025.

CGT is now harder to avoid and harder to manage

From £12,300 in 2022/23 to just £3,000 today, the cut in the CGT annual exemption has been swift and steep. While the majority of portfolios may sit within tax wrappers, clients with general investment accounts (GIAs) are now more exposed to the tax implications of everyday investment decisions.
Quarterly rebalancing or tactical fund changes can all inadvertently crystallise gains. As many advisers have seen first-hand, this can result in:

Unexpected tax bills for clients
Difficult conversations at review time
Time-consuming reporting and suitability documentation

With the Financial Conduct Authority (FCA) placing increased emphasis on outcomes and value for money, CGT crystallisation events caused by inefficient portfolio structures are fast becoming a compliance concern as well as a client service issue.

With the Financial Conduct Authority (FCA) placing increased emphasis on outcomes and value for money, CGT events caused by inefficient portfolio structures are fast becoming a compliance concern as well as a client service issue.

Why traditional MPS models can trigger unnecessary gains

In most traditional MPS portfolios, changes to asset allocation or fund selection are implemented by switching between third-party funds. That might mean:

Selling one fund and buying another to reflect a new market view
Rebalancing between asset classes by adjusting external fund weights
Switching between similar funds that have different sector tilts or regional exposures

These changes, however routine, can trigger a CGT liability if they’re made within a GIA and the client has already used their allowance. Because those changes happen at portfolio level, there’s often little opportunity to tailor or delay them to suit the individual client’s tax position.

A structure designed to reduce CGT crystallisation events

At Rathbones, we’ve taken a different approach. Rather than blending multiple third-party funds, we construct each MPS portfolio using three purpose-built in-house funds aligned to our Liquidity, Equity-type risk and Diversifiers (LED) framework.

Because each of these funds is a portfolio in itself, many of the active decisions – such as switching holdings, adjusting sector exposure or responding to market shifts – take place within the funds. These internal trades do not crystallise CGT for the end investor.

The only time a CGT crystallisation event might be triggered is if the weightings between the Liquid, Equity-type risk and Diversifier funds change – and this happens much less frequently than the typical rebalancing or fund switching seen in conventional MPS solutions.

The result can offer a cleaner, more tax efficient experience for clients and may reduce admin for you.

Easier for clients, easier for compliance

Because the majority of rebalancing and repositioning takes place inside the underlying funds, the risk of CGT crystallisation at client level is dramatically reduced. That means:

Fewer tax calculations and CGT reporting requirements
Less client confusion at review time
Greater consistency across your GIA book
A clearer audit trail that supports Consumer Duty and suitability

It also makes it easier to demonstrate ongoing value – a growing expectation in light of FCA guidance.

Because the majority of rebalancing and repositioning takes place inside the underlying funds, the risk of CGT crystallisation at client level is dramatically reduced.

Not CGT-free, but CGT-aware

Of course, no MPS structure can eliminate CGT entirely. But the Rathbones approach is designed to reduce unnecessary crystallisation and give advisers greater confidence in the underlying mechanics.

It’s a structural advantage that’s especially helpful for clients who:

Are near or over the CGT threshold
Have legacy investments in GIAs
Are making use of interspousal transfers

As tax allowances become tighter, structures that help minimise friction and reduce CGT crystallisation events are likely to become more attractive – and more defensible.

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