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BUDGET: CGT rises to 28% from midnight for high earners

The Government is increasing the rate of capital gains tax to 28 per cent for higher rate earners from midnight tonight.

The annual CGT exemption allowance of £10,100 will remain unchanged this year but will rise with inflation in future years.

Savers paying the basic rate of income tax will continue to pay CGT at 18 per cent.

The 10 per cent CGT rate for entrepreneurs which currently applies to the first £2m of qualifying gains made over a lifetime will be extended to £5m to promote enterprise.

Osborne said the introduction of tapers or indexation allowances would have added “self-defeating” complexity and administration to the system.

He said the changes would protect the majority of taxpayers, keep the top-rate of CGT in line with the UK’s international competitors while keeping a simple system that reduces the incentives to convert income to capital gains.

The Government expects the changes to reap an extra £1bn of receipts which it believes will come from additional income tax payments.

The Investment Management Association welcomed the Chancellor’s decision to maintain the CGT threshold. Director of authorised funds and tax Julie Patterson says: “This provides an important buffer for those on modest to middle incomes against capital gains arising simply from inflation. It keeps  thousands of basic rate tax payers out of complex annual tax calculations as  they drawdown their savings during retirement. Preserving the threshold sends an important message that people should continue to be encouraged to save for  the long term.”

Law firm Thomas Eggar LLP private client team partner Nicola Plant says: “High earners have already seen an increase in the top rate of tax to 50 per cent and changes affecting pension contributions. Bringing capital gains tax back into line with income tax was, therefore, a logical and not unexpected next step.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. What is a ‘higher rate earner’ for CGT ? I earn 50K, when I earn more than £10100 how much CGT would I pay ?

  2. Are ‘earnings’ not subject to Income Tax? 🙂

  3. I thought the Budget statement was quite clear (though admit I’ve not trawled through tons of accompanying statements to find incremental confusion) – if you’re a higher rate tax payer then you pay 28% on gains in excess of the annual allowance. If you’re a basic rate taxpayer the answer is 18% – I guess that means unearthing planning opportunities around ensuring people are not unnecessarily paying higher rate tax – situation normal then.

  4. So are we talking both 40% and 50% taxpayers paying the higher CGT? Will the 40% band still be classed as ‘higher-rate’ despite the new 50p band?

  5. I told you that osborne was a garath hunt and nobody listened

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