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90,000 more people set to be caught in CGT net

Thirty-five per cent more people will pay capital gains tax this year compared with last year, predicts Skandia.

The company says that some investors will pay a lower rate of CGT due to the introduction of the 18 per cent flat rate but overall more people will be liable to pay the tax.

Skandia says this is due to the removal of indexation and taper relief which has reduced the real value of the annual CGT exemption.

Previously, clients holding assets for 10 years or more would only pay tax on 60 per cent of their gain and could reduce their CGT liability as taper relief was applied before annual exemption.

In 2007, a total of 260,000 people paid capital gains tax and, based on a calculation of Government figures, Skandia expects this to rise by over a third to reach 350,000 this year.

Head of tax and financial planning Colin Jelley believes that investors in the starting and basic-rate tax bands or those with modest gains will foot the bill.

He says: “Whereas previously they would have been liable to pay 40 per cent of nothing, now they are liable to pay 18 per cent of something. In other words, their tax liability has gone up.”

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