There continues to be debate about how proposed capital gains tax (CGT) increases will be introduced in the emergency budget on 22nd June.
Commenting in an article in Money Marketing, Informed Choice chartered financial planner Martin Bamford has called for taper relief to avoid penalising investors with long-term holdings.
“The Government needs to reward people that hold on to investments for longer.
Taper relief is the fairest and simplest way of doing this but the Government needs to look at the timescale. I think they should reward those who hold on to investments for even longer than five years, with incentives to invest for 10 or 15 years.”
This follows calls from Conservative backbencher John Redwood who has suggested a new CGT regime designed to encourage long-term investors.
Business Secretary Vince Cable has since sought to reassure investors that the CGT increases will not damage entrepreneurs.
Whilst we have to wait until 22nd June to see what emerges, we expect to see the rate of CGT rise from 18% to 40% or 50% on non-business assets. The changes could also see the CGT annual exemption reduced from the current rate of £10,100.
There is also the possibility that CGT changes will be backdated to the start of this tax-year, as it is unusual for the rules to be changed part way through a tax year. Whilst retrospective tax changes are virtually unheard of, the severity of the budget deficit and need to raise additional tax revenues to fund other changes to the tax system could prompt the coalition government to take these steps.
If retrospective changes are applied then it could mean bad news for investors, particularly property owners, who have rushed to sell assets ahead of the emergency budget.
