Clifton Asset Management

CHANCELLOR MUST CUSHION IMPACT OF CGT CHANGES, SAYS CLIFTON TAX PRACTICE

The head of a new tax practice which advises SMEs and owner-managed businesses has called for an urgent re-think over the Coalition Government‘s plans to raise Capital Gains Tax (CGT).

Chancellor George Osborne is set to announce that CGT for non-business assets will be increased from 18 per cent to 40 or even 50 per cent in his emergency Budget on 22nd June.

Mr Osborne says the increase is necessary to at least part pay for an increase in the lower rate income tax threshold to £10,000 over the next five years.

But Katie White, partner at the Clifton Tax Practice, says there is a danger that the move may not bring in the additional revenue which the Treasury hopes, as it will be avoided by the very wealthy – leaving the majority to pick up the bill.

“This measure could have a real impact on thousands of hard-working people who have invested and saved for the long-term and are now approaching retirement,” she said.

“At the very least the Chancellor should re-introduce taper relief or an indexation measure which will protect those sitting on long-term gains from the effects of inflation. One proposal has been to tax one-year gains at the top level of income tax, then tapering down to 0 per cent for assets held over five years.

“Another concern for small business owners is that before the General Election the Liberal Democrats were calling for the annual CGT exemption limit to be reduced from £10,100 to £2,000.

“I believe this is another potentially damaging measure. However, if the allowance does drop to that level, people should at least be able to carry forward unused allowances to the time when they need to draw on their investments.”

ENDS 10th June 2010

Photo caption: Katie White, partner at the Clifton Tax Practice

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