The Capital Gains tax rate for higher-rate taxpayers will rise to 28% from
midnight, a smaller rise than experts had predicted, Chancellor George Osborne
announced earlier in the Emergency Budget.
The CGT rate for non-business assets such as shares and second homes, will
rise from 18% to 28% for people earning more than £150,000 a year, less than the
40% rate predicted by many tax experts.
In his first Budget speech to the House of Commons Osborne ruled out
re-introducing both indexation for CGT, which strips out the impact of inflation
from profits on sales, and re-introducing taper relief, which cuts the CGT rate
for assets held over a longer period of time.
Osborne increased the 10% CGT tax band for entrepreneurs from a lifetime
allowance of £2m to £5m for business assets, including shares in qualifying
Osborne said that the Treasury had calculated that a 40% CGT rate would yield
less tax receipts than 28%, probably based on the assumption that a higher CGT
rate would encourage people to hang on to their assets.
Chris Sanger, Ernst & Young’s head of tax policy, said: “Today’s changes
to Capital Gains Tax produce a smorgasbord of a Capital Gains Tax system, with
10%, 18% and 28% rates and no relief for inflation.”
“The increase of entrepreneurs’ relief to £5,000,000 per lifetime will go
some way to help entrepreneurs, but will put increased pressure on who qualifies
for relief. Overall, the top rate is not as high as many will have feared but
the lack of indexation could mean that many will pay tax not on gains but on
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