Osborne Sticks By UK CGT Hike

by Amanda Banks, Tax-News.com, London

20 July 2010

The UK Chancellor George Osborne has announced that the rate of capital gains tax (CGT) will not be increased again during the lifetime of the current Parliament.

The Chancellor introduced the new rate of 28% CGT for higher earners when he announced the emergency budget last month. Osborne told the Commons Treasury Select Committee that it was felt that CGT was being abused while the rate was 18%. Osborne told the Committee that “I certainly regard [the change] as permanent and am not planning to revisit this decision in this parliament.”

The Chancellor told the Select Committee that about half of the number of people who pay CGT will still only pay the tax at the rate of 18%, the rate applicable to basic rate taxpayers.

Spokesmen for affected industry sectors welcomed the news in that it brings stability to future planning. Earlier this month, a poll by technology solutions provider 1st Exchange revealed that many advisers were moving their clients away from assets attracting CGT in anticipation of further rises in the tax rate.

The poll of 187 advisers showed that 29% had advised their clients to take precautionary measures and move their assets into more tax efficient vehicles. While the majority surveyed were relieved that CGT was not increased as much as feared prior to the emergency budget, there was an almost equal split between those who were advising their clients to stay invested in order to avoid triggering a CGT event, and those who were advising clients to take market gains despite the increase.

The announcement means that the rate of CGT will remain stable until May, 2015, allowing those potentially affected by the tax to plan with a degree of certainty.

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