Under the revised proposal announced today small business owners will only have to pay 10 per cent tax on any profits they make up to a cumulative limit of £1m. Any profits beyond this will be taxed at the higher rate of 18 per cent.
Darling proposed in October’s pre-Budget report to scrap the lower 10 per cent CGT rate and replace it with an 18 per cent flat rate which spurred months of lobbying from business groups and small firms claiming it stifled entrepreneurialism.
The Chancellor also announced further discussions will be held with the insurance industry to find a solution to the problems caused in the insurance bond market by the proposed changes to capital gains tax.
The 18 per cent flat rate of CGT will create an unlevel playing field in the investment bond market because income from insurance bonds will still be subject to income tax rates – 40 per cent for higher rate payers – while income from other investment products like unit trusts would be subject to the new, 18 per cent rate.
An ABI spokesman says: “The Treasury has today accepted that the announcement on CGT created specific and adverse problems for savers and the savings industry. It is vital that the Government now commits itself to resolving these as soon as possible. We will continue to press this case on ministers.”