CGT rise would hit equity-financed businesses

Experts have warned the proposed hike in capital gains tax could cause businesses to snub equity for debt.

The financial crisis was exacerbated by the amount of debt companies took out, and the CGT rise on non-business assets to align it more closely with income tax will disadvantage businesses.

Philip Booth, editorial and programme director at the Institute of Economic Affairs said:

“The doubling of Capital Gains Tax would be a huge mistake for Britain."

Booth said it penalised companies financing themselves through equity rather than debt, representing a "double tax" on holders of shares.

"Surely we have learned from the financial crash that we should not be artificially encouraging companies to take on more debt," said Booth.

Further reading:

Private equity sector calls for CGT exemption