Skandia head of tax and financial planning Colin Jelley says the Government’s decision not to raise capital gains tax is just “delaying the inevitable”.
CGT currently stands at 18 per cent and was paid by 269,000 people in 2007/2008.
Industry experts expected the Chancellor to align CGT more closely with income tax which is 50 per cent for the highest earners.
Jelley says: “With marginal tax rates for the employed between 32 per cent to 62 per cent and inheritance tax at 40 per cent, why would you keep CGT at 18 per cent?
“It was introduced in 1965 as a giant anti-avoidance provision and if the provision does not have any teeth, people are going to try and convert income into capital gain.”
KPMG head of private client advisory David Kilshaw says although a CGT rise is absent, the Government will continue to target financial planning strategies which exploit the disparity.
He says: “I think Darling is looking to buy himself a bit of time. What they will do is targeted legislation. He is saying, I am happy with 18 per cent as long as you do not try to be too clever in converting income into capital and, if you do, I will hit those planning ideas. It was the flavour of what is in their minds.”
Bestinvest senior investment adviser Adrian Lowcock says: “I think they put it off because it would have been a U-turn and would have played into the hands of the Tories.
“When levels were the same, you had investors staying in funds and investments and getting stuck with a large investment and too much capital gain and not coming out, afraid of paying the tax, so I like having a low CGT because it helps investors manage their portfolio more effectively.”