Concessions Expected for UK Capital Gains Tax

May 31, 2010 Taxation in UK

George Osborne, MP (Shadow Chancellor of the Exchequer)The recently proposed rate change to Capital Gains Tax (CGT) in the UK is coming under doubt as economists, finance industry figures and numerous politicians are beginning to voice their concerns for the raised levy.

Following the UK’s May 6th General Election, a coalition was formed between the Conservative Party and Liberal Democrats. The new coalition soon announced several proposed changes to the country’s tax system, including a controversial increase in the CGT rate. If the planned changes are enacted, CGT in the UK will increase from the current 18 percent to 40 percent, the highest rate among western economies. Additionally, the coalition has indicated that the CGT earning threshold will be decreased from GBP 10 000 to GBP 1 000. As a result of public outcry against the change, indications are emerging that the intended changes will be altered before the national Emergency Budget announcement, scheduled to be given by Chancellor George Osborne on June 22nd.

Several representatives from the investment fund management sector have claimed that significant numbers of clients are growing concerned about the economic outlook of their investments, and the implications a rate change will have on retirement funds. David Green, Director of the UK think-tank Civitas, has stood in outspoken opposition to the CGT increase, claiming that it will punish entrepreneurs and stifle the UK’s economic recovery. His sentiments have been echoed by media sources across the UK.

On May 30th Iain Duncan Smith, UK Work and Pension Secretary, attempted to relieve tensions surrounding the CGT changes by emphasizing that no concrete decisions has yet been reached by the UK Government, and changes to the CGT system are still under the consideration. In a television interview he said, “..the chancellor has been clear that he is listening to everything and he will make the final decisions. He has also talked about major exemptions for all kinds of different groups.” The Secretary also added that the Chancellor intends to provide CGT concessions aimed at entrepreneurs and retirement funds.

Photo by Ewan McIntosh