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Pre Budget Report 2009: Capital gains tax could reach 25%

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30th Oct 2009
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The chancellor is expected to increase the main rate of capital gains tax to 25% in the upcoming Pre-Budget Report, according to predictions from MacIntyre Hudson.

The accounting firm, which released its Pre-Budget Report predictions this week, said the government may try to close the discrepancy between the main rate of capital gains tax (currently 18%) and the standard and higher rates of income tax (20% and 40% respectively).

Entrepreneurs’ relief, through which individuals pay an effective rate of 10% CGT, is expected to remain in place but may be phased out over five years.

Patrick King, principal at MacIntyre Hudson said: “While increasing the main rate of CGT will still leave a troublesome gap of 25%, it will at least have the politically symbolic effect of making absolutely sure higher earners pay more tax than those on low incomes.

“Recalling the contempt private equity barons were held in at the height of the boom when confessing to paying less tax than their cleaners, this is an easy political victory in the current economic climate. Anything higher than 25% would be too punishing during the fragile recovery, while some level of gap between CGT and income tax is justified as capital gains involve a level of risk that income does not”.

For more coverage of the Pre-Budget report predictions, visit our sister site, FinanceWeek.co.uk.

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By Phil Rees
05th Nov 2009 12:42

Amazingly

this would be the first ever increase in the rate of capital gains tax by a Labour chancellor since the tax was introduced in 1965.

 

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By Trevor Scott
05th Nov 2009 18:55

It is depressing

... to think how long it will be before they start reducing taxes again.

Can anyone else remember the genuine sense of excitement, after years of depression and high taxes, in the run up to Nigel Lawson’s budgets that at the time seemed to signal a new age of hope for the country. Since then, budgets as an entertainment event have become bland, undermined by leaks and these pre-budget speaches. The next one may only be interesting in terms of the colourful projections of tax collections and rates that will probably never happen.

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