The Liberal Democrats have floated plans to increase the capital gains tax rate for higher earners from 28 to the top rate at which they pay income tax and slash the annual tax-free allowance.
Those on the 40p or 45p income tax rate currently face a CGT rate of 28 per cent while lower rate taxpayers pay 18 per cent. Under the proposal, the tax paid for high earners would rise to 40 or 45 per cent depending on the top level at which they pay income tax.
The tax free capital gains allowance would also be cut from £10,900 to £2,000.
The move is part of a raft of proposals from the party’s tax working group that will be voted on by members at the party’s conference next month.
The policy document says: “The Liberal Democrats believe that Government has an important duty both to enable people to get on in life and to ensure that everyone pays their fair share. Our tax system has a crucial part to play in achieving this and we set out our proposals here for how it should do so.”
Other proposals include:
- Raising the income tax threshold to be in line with full-time minimum wage employment (or roughly £12,300) and targeting national insurance threshold increases for low earners.
- Reinstating the 50p top rate of tax for those earning over £150,000, recently scrapped by the Coalition Government.
- Extending the time period for which transfers of wealth are within the scope of inheritance tax from 7 years to 15 years.
- Replacing inheritance tax with an Accessions tax which would levy tax based on the recipient based on their circumstances rather than on the estate of the deceased.
- Capping the “excessively generous” lifetime limit for tax relief on pension contributions at £1m. It currently stands at £1.5m and will fall to £1.25m in April next year.
- Providing Isa allowances for investment into enterprises with environmental and/or technological benefits.
- Strengthening the General Anti-Abuse Rule to a General Anti-Avoidance Rule to “minimise the need for the detailed specific anti-avoidance legislation”.
- A mansion tax of 1 per cent on the value of residential properties in excess of £2m.
A number of different proposals were put forward before the party’s spring conference, including abolishing the CGT tax free allowance altogether.