Capital Gains Tax: Boost for thousands of people with second homes

Thousands of second-home owners and wealthier individuals were among the winners from yesterday's pre-Budget report, after the Government unveiled plans to slash the rate of capital gains tax from 40 to 18 per cent.

Currently, individuals are taxed at 40 per cent on any gains above £9,200 in any one tax year – although using taper relief, this rate can be reduced to as little as 24 per cent on assets held for 10 years or more.

CGT tends to hit holiday-home owners and residential buy-to-let landlords who are selling their properties, as well as wealthier individuals who realise capital gains when selling investments. However, as of 6 April next year, all capital gains above the personal allowance of £9,200 will be charged at a flat rate of 18 per cent – while taper relief will be scrapped. For those who don't make full use of taper relief, this will mean a 55 per cent reduction in their CGT bill, while even those who have held their assets for 10 years or more will pay 25 per cent less tax. Individuals will no longer need to hold on to their assets for many years to minimise their tax burden.

Gavin Oldham, chief executive of the Share Centre, said the changes could increase liquidity in some investments, as investors would no longer be forced to hold on to assets to benefit from taper relief. "This will provide a major encouragement for those investing in listed UK equities and should result in significantly improved liquidity," he said.

Gary Robins, chief executive of Hotbed, the UK's largest private investor syndicate, said the changes would be bad for smaller companies and would encourage short-termism. "Taper relief was put in place to encourage investment in unlisted securities and reward private investors for holding unlisted shares for longer periods of time," he said.

"Doing away with taper relief altogether means that there is no longer any reason for investors to hold unquoted shares for a longer period.

"It will have the undesirable effect of encouraging short-termist investing."

Caroline Bevan, senior manager at PricewaterhouseCoopers, said while 18 per cent was a competitive rate, there remained a danger that the increase would drive businesses overseas.

Ruth Dooley, a tax partner at Grant Thornton, the accountants, pointed out that employee share schemes also stand to be adversely affected by the changes. Currently, employees are only taxed at 10 per cent if they hold their shares for two years or more. Under the new regime, that changes to 18 per cent.

Greg Limb, a director at KPMG, the accountants, added that the removal of tax breaks for employees was at odds with previous government policies. "This seems at odds with the Government's stated aim of encouraging entrepreneurship and investment... many listed companies will feel sore that there will be no incentive for them to encourage their staff to hold their shares," he said.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

A poster by Durham Constabulary
Arts and Entertainment
books New York Times slammed over summer reading list
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine