Relief at lower-than-expected rise in capital gains tax

News that capital gains tax (CGT) is being increased to 28% for higher earners was met with relief today.





The Chancellor announced plans in the Budget to hike the rate at which the tax is charged on non-business assets from 18% to 28% from midnight tonight for higher rate taxpayers.



But the rate is far lower than the 40% or 50% that it had been widely feared CGT would be increased to.



The annual CGT allowance will also remain unchanged at £10,100, despite speculation that it would be slashed.



There was even an increase in the lifetime allowance for gains made by entrepreneurs which are free of the tax, with this rising from £2 million to £5 million.



The rate at which entrepreneurs pay the tax will remain unchanged at 10%, while basic rate taxpayers will continue to pay CGT at 18%.



Leonie Kerswill, personal tax partner at PricewaterhouseCoopers, said: "Many taxpayers were worried that CGT rates would be aligned with the highest rates of income tax so will breathe a sigh of relief that the top rate has only been increased to 28%."



But David Kilshaw, head of private client at KPMG, said: "A 28% rate sounds relatively good in the circumstances - but only because people were fearing a 50% rate. It still gives the UK one of the highest rates in Europe."



The increase aims to narrow the gap between the rate higher earners pay on CGT and the one they pay on income tax to cut down on income tax avoidance.



It is thought that around £1 billion in tax revenues is lost every year through people taking income as capital gains.



Today's change is expected to boost revenues by £725 million next year, rising to £925 million in 2014/15.



But George Osborne said he had stopped short of raising the rate at which the tax is paid above 28%, as research had suggested this would actually lead to a fall in revenues.



Mr Osborne also refused to bow to pressure to re-introduce some form of taper relief to reduce the amount of tax paid by people who have held assets for longer periods, in order to keep the system simple.



The increase in the CGT rate is not expected to spark of flood of sales from buy-to-let investors, as had been predicted if the tax was raised higher and there was a delay before the new rate was introduced.



Stuart Law, chief executive of property investment advice group Assetz, said: "This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy-to-let property once this new tax rate is introduced at midnight tonight."



But Richard Mannion, of Smith & Williamson, said: "It's unprecedented to have a change midway through the tax year.



"This will complicate the tax return for 2010-11 as it will mean pre and post Budget day gains will need to be reported separately."



The Chancellor also announced today that holiday lets would be classed as business assets for CGT, reversing a change introduced by the previous government.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + Uncapped commission: SThree: Does earning a 6 figu...

Recruitment Genius: SEO Executive

£18000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: New Lift Sales Executive - Lift and Elevators

£35000 - £40000 per annum: Recruitment Genius: A challenging opportunity for a...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss