CGT revised – again!

by Richard Allum on 24 January 2008

The government has announced changes to capital gains tax (CGT), confirming that it will set a single 18% rate and cease taper relief from 1 April. But Chancellor Alistair Darling also said there would be a 10% rate on gains of up to £1m, to help entrepreneurs.

The original plans to raise the rate had met with fierce criticism from the Institute of Directors, the CBI and the Federation of Small Businesses. Small business owners, especially those who had hoped to sell their firms and use the proceeds in retirement, had been especially annoyed.

Uncertainty

Taper relief currently allows some higher rate taxpayers to pay as little as 10% CGT on profits from the sale of assets in any unlisted company or publicly-listed firm they work for, as long as they have held them for two years. It can also reduce the CGT liability for some basic rate taxpayers to 5%.

The changes would mean private equity bosses, some of whom have made fortunes from buying and selling companies, would no longer be able to pay just 10% on their profits.

Implications

When selecting suitable investment wrappers for a client, tax is a crucial consideration. ON the face of it this could spell trouble for investment bonds although each case has to be considreed on its merits. More on this to come soon.

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