Ministers plan exemptions to rise in capital gains tax

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Indy Politics

Ministers signalled yesterday that they are planning wide-ranging exemptions to the planned increase in captial gains tax.

The Work and Pensions Secretary Iain Duncan Smith said that entrepreneurs and families saving for retirement are among the groups who are likely to be protected from the rise.

Under proposals put forward by the coalition government, capital gains tax will rise from 18 per cent to 40 or even 50 per cent. The intention is to set it at a level "similar to close" to income tax for higher earners. It is applied to profits made on the disposal of assets, such as shares and property, but some sales are already exempted including, in most circumstances, people's main homes and their cars.

But second-home owners fear they will be heavily penalised and those that use properties as a savings plan for retirement feel particularly aggrieved.

Conservatives on the right of the party have been especially concerned at the likely effects of 40 or 50 per cent capital gains tax on savers and on entrepreneurialism because of fears that profits would be slashed. Former ministers David Davies and John Redwood have been among the most outspoken critics.

Mr Duncan Smith said that George Osborne, the Chancellor, is determined to "take the sting out of" the proposed rise. "The Chancellor has been clear that he is listening to everything and he will make the final decisions," he said on the BBC's Andrew Marr show.

"He has also talked about major exemptions for all kinds of different groups. We don't want to harm entrepreneurs, we don't want to harm families heading towards retirement and have saved and planned for that. He is definitely looking for ways in which we can take the sting out of this."

Capital gains tax raised £7.85bn for the Treasury last year. The Lib Dems calculated in their manifesto that the proposed increase will swell government revenues by more than £1.9bn.