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Categories:Politics

LibDems plan to abolish CGT tax-free allowance

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Nick Clegg LibDem Rally 2012 Sep 480

The Liberal Democrats are set to propose the effective abolition of the tax-free allowance for capital gains by combining it with the income tax personal allowance.

In its taxation policy consultation, published this week ahead of its spring conference, the Lib Dems say the measure would raise £2.6bn for the public purse.

Those paying capital gains tax currently have the first £10,600 tax-free, while income tax has an £8,105 allowance. The LibDems are likely to propose a £12,500 personal allowance in their next manifesto.

The paper says the move is deigned to stop some people shifting their earnings between income and capital gains.

Association of Chartered Certified Accountants head of taxation Chas Roy-Chowdhury says: “What the LibDems are really trying to do is abolish the capital gains allowance through a sleight of hand which is grossly unfair.

“They should be clean about it. It is not the right approach as we have too much complexity and politics going into tax policy as it is.”

Hargreaves Lansdown head of advice Danny Cox says: “The LibDems are effectively wiping out the capital gains allowance as most people’s incomes will be in excess of a combined personal allowance.

“It is a one-size-fits-all approach to tax policy, using sledgehammer to crack a nut by tackling a few minor situations. There are not many people taking huge parts of their earnings in capital gains.”

The policy paper also wants capital gains to be levied on the sale of inherited property, which is currently exempt.

It calls for a further radical overhaul of inheritance tax by taxing the recipients of inheritance based on their income rather than the value of the bequeathed wealth. A similar system currently operates in other countries such as Ireland.

The paper reiterates LibDem policy that gifts should be made 15 years before death to be IHT free, more than doubling the current level of seven.

The wide-ranging consultation also targets pension tax relief with a focus on reducing the 25 per cent tax-free lump sum pensioners can withdraw from their pot when they retire.

It proposes cutting the annual pension tax relief further from £40,000 to £30,000 just weeks after it was cut from £50,000 in the December autumn statement.

The Lib Dems also want to see the lifetime allowance cut back from £1.25m to £1m, after it fell from £1.5m in the autumn statement.

The have also proposed a mansion “super tax” which would see their plans to charge a 1 per cent levy on homes worth over £2m extended to cover property portfolios including buy-to-let and second homes where the combined value of the portfolio totals £2m or more. The Lib Dems say under the proposals retired homeowners would be able to defer the mansion tax until death and pay it as part of their estate, to reflect those whose homes are worth more than £2m now but were originally bought for a much lower price.

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Readers' comments (10)

  • In 2010 Nick Clegg tried to defend his expense claim of nearly £84,000 on his second home, and at the time was quoted as saying “Any gain on it when I sell it, which I will do very soon ... after the election will go straight back to the taxpayer.”

    Did it?

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  • Well, I'm not a big Lib Dem fan, but I wouldn't have a problem with any of those proposals. All seem fair and reasonable to me.

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  • Never going to happen
    Lib Dems will never again be in power.
    They will be consigned to history as a one term wonder.
    Good riddance.
    Vote UKIP.
    Why did he not add MPs flipping houses should no longer be MPs?

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  • Genius. Has anyone done a cost/benefit analysis of making people do Self Assessment to declare £1 of capital gain!? This and the ridiculous family benefit rules should ensure most of the UK are forced into self assessment, massively increasing compliance costs, and having minimal impact on revenue raised!

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  • @ Matt

    These things are not designed to make the tax system fairer but simply to raise more tax that the government can spend on worthless people and insane overpriced projects. Local government raises £22 Billion from council tax and £26 Billion from other services such as parking and planning fees. VAT is now 20%. Small businesses struggle to survive amid the 300 tax rises imposed by this government.

    Quite simply, we spend to much as a country!

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  • I just don’t have the time to respond to these ridiculous and banal 11 points. Suffice it to say that the Lib Dems used to hold their conferences in a Telephone Booth; it looks like they are manoeuvring to hold them in a matchbox in the future.

    Much as I think Dave is a whimp – if had any guts he’d call en election tomorrow and see these loonies off to the wilderness where theyt belong.

    These are the proposals from a party who know they will never be in power and are merely playing to their gallery (or should it be 3 seater settee?).

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  • What's the difference between a Lib Dem manifesto and a bucket of s**t?

    The bucket.

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  • I am exasperated, don't they have more important matters to resolve?

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  • Could be seen as one step in the direction of simplifying the tax system.

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  • Is it any wonder that at the lower end of the social scale, there resides little motivation to better themselves, build up savings and pensions, acquire a home of their own and work for a living when nut jobs like Clegg and Co seem determined to take it all away in excessive taxation.

    If ever there was designed a strategy for the Lib Dems to be sidelined as as serious political party, this is it.

    I think David (call me Dave) Cameron is a wiley old chap, best thing to get rid of an irritating opposition party is to give it enough rope to hang itself out to dry with the electorate by allowing them to come up with such bizarre and quite draconian tax proposals, which are both insulting and quite worrying that they don't realise such daft ideas alienate their supporters.

    I used to be one, not any more, give me UKIP at least you know that if other parties are calling UKIP, UKIP are on the right track and must have them worried.

    Makes you wonder what sort of education these people actually had if they do not realise how much damage they will do to ordinary working people when they take away what has worked for years and substitute it with more tax, just to fund MPs second homes and pension pots.

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