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Govt hints it may water down CGT rise

Work and Pensions Secretary Iain Duncan Smith has hinted the coalition may water down its plans to significantly raise Capital Gains Tax in the forthcoming emergency Budget.

Speaking on the BBC’s Andrew Marr show on Sunday, Duncan Smith (pictured) said no decision has yet been made on CGT rises, insisting that Chancellor George Osborne is listening to the concerns that have been expressed by the industry and Tory backbenchers.

He said: “None of the levels have been decided. The Chancellor has been clear that he is listening to everything and he will make final decisions. He has also talked about major exemptions for all sorts of different groups because we do not want this to harm entrepreneurs and we do not want to harm families that are heading towards retirement who have actually saved.

“George has discussed it with me and others and he is definitely looking for ways in which we can take the sting out of some of this.”

The Liberal Democrats pushed for the CGT rise in order to fund the increase to the tax-free income tax threshold for the lowest earners towards £10,000. The coalition agreement included plans to increase CGT, potentially to levels similar to income tax, with measures put in place to protect entrepreneurs.

Before the general election, the LibDems were calling for the annual CGT exemption limit to be reduced from £10,100 to £2,000, although reports over the weekend suggest the Government is looking to stick to the current level.

Last week senior Conservative backbenchers David Davis and John Redwood lead a revolt over the plans to hike CGT.

Davis warned that increasing CGT is unlikely to bring in the expected revenues calculated by the Government as it would be avoided by the very wealthy, while the elderly would be hit hardest.

Redwood wrote an open letter to exchequer secretary to the Treasury David Gauke in which he outlined his strong opposition to the CGT rise and suggested instead that one year gains are taxed at the top level of income tax, tapering down to 0 per cent for assets held over five years.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Wonder if the Lib Dems feel that they are being shafted now that they have put the Tories into Downing Street. Clegg must feel like a right idiot!!!
    But then why not feel what you are?

  2. CGT should have never been put down to 18% for personal assets which included BTL. Put it back to income tax levels with no taper relief along with control on lending this with stop future house price rises and give people a chance to get on the housing ladder.

    Buying houses as an investment with lots of debt and no real business plan is not a pension. We should also be thinking what effect on the house prices and the economy this type of activity has both positives and negatives.

    I wonder how many buy to let properties David Davis and John Redwood have as they are so concerned over changes to CGT. Many of our MPs have become very rich over property investments and this just smacks of vested interest to me. Raising the new rate band for income tax up to £10,000 will help millions of people wears rises in CGT will actually affect a few. Using the excuse of enterprise is also a red herring as an enterprise allowance is now £2 million per person and there is no proposal to change this.

    It is also worth noting that many people who work in private equity firms were extremely delighted when capital gains tax was reduced 18% as the majority of their income is paid in this way.
    Peter

  3. It’s a simple math. CGT is non-mandatory tax. You don’t have to pay for it. If it goes up, tax revenue goes down. Why? Who in their right mind will want to give 40-50% of what they own if they can hold on it as long as possible. And who in their right mind will want to invest, if all the risks they take, but almost half of future gain will be stolen by the government. The US and other countries pays less than 18% CGT anyway. Vince Cable and liberals must live in a suicidal world.

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