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Royal London calls for review of capital gains change as savers could take hit

The Government may have underestimated the impact of a change in corporation tax rules on individual savers, according to Royal London.

The November Budget wound down the ‘indexation allowance’ for capital gains from 2018, aligning the treatment of companies with individuals, but meaning that investment growth in line with inflation would now be subject to tax.

Since the measure applied to corporations, the Government said it would have “no impact on individuals or households”, but Royal London claims that three million of its policyholders and an estimated 11 million savers in total would be hit, and the total bill could be around £250m.

Royal London is now calling for a review of the rules, after seeing a standardised letter responding to public enquiries about the change, in which the Government acknowledges it will likely have a “small” impact on savers.

Royal London director of policy Steve Webb says: “MPs have clearly been misled by the information which the Treasury has put out on this issue. Far from having ‘no impact’ on households, this stealth tax will hurt around 11 million savers.   If MPs had been told this from day one there would have been much more opposition to this measure.  There is still time for Parliament to scrutinise this new tax and stand up for small savers up and down the country”.

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  1. So Gordon Brown played around with tax on dividends, using a short term means of thinking that no-one would notice or through which be immediately affected. How many private sector pension scheme providers think differently? He’s now apparently an intellectual on a public sector pension.

    We know that reinvested income and compounding provides the bulk of all returns in any asset class. So taxing today just moves the bubble in the carpet, a bit like doing a deal with Stalin or Hitler.

    Nice piece of paper being waved around but ‘oh bu@@er’ a few years later.

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