Tories Pledge To Slash UK Capital Gains Tax

by Robert Lee, Tax-News.com, London

30 December 2004

Under new plans being considered by the Conservative Party, capital gains tax in the UK will be dramatically reduced or even abolished in an attempt to make the system fairer and easier for businesses.

Announcing the new proposals on Tuesday, the Conservative Party finance spokesman Oliver Letwin remarked that the current capital gains tax regime has become a ponderously complex and expensive system, with the tax now costing 50% more to collect than five years ago.

"Since 1998, the Government has changed the capital gains tax rules in five ways, making the system ever more complicated,” observed Mr Letwin.

“Its current structure distorts investment and has a negative effect on the economy. It discourages people from using capital in an enterprising way,” he added.

According to a Telegraph report, the Conservatives have sketched out three options for capital gains tax reform that will provide the basis of discussions with business groups and tax experts, with a view to forming a policy pledge ahead of the next general election, widely expected in 2005.

The first of these would see the tax completely abolished at a cost of £2 billion, the second option would introduce a 10% flat rate at a cost of £1 billion, while the third option would also see a 10% flat tax, but only on assets held for two years or more.

“We think it is right that capital gains should be taxed more favourably than earnings,” argued Mr Letwin.

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