Why is there such a big deal about a CGT rise?

drc

I don't get the big deal about the possibility of Capital Gains Tax rising to 40% again? Wasn't it only reduced to 18% in 2007 from 40%? If this is the case, it won't really make much difference in terms of BTL/ selling of assets surely as most big profits were made during the pre-2007 HPI, so serious BTL/LL would have been used to such a high historical rate and planned for it surely?

Will there be something different about it this time? Why all the hysteria?

Can someone correct me if I am wrong.

silvercar

Taper relief gave a discount on the 40% based on how long the property had been owned. So a property owned for 10 years had full taper relief that brought the 40% down to 24%. It was designed to encourage people to hold onto property as an investment rather than get-rich-quick, jump in and out.

StevieJ

drc wrote: »

Can someone correct me if I am wrong.

Most people have not got a problem with CGT at the marginal rate of tax e.g. 20/40% providing some indexing for inflation is included and the tax free allowance stays.

kennyboy66_2

StevieJ wrote: »

Most people have not got a problem with CGT at the marginal rate of tax e.g. 20/40% providing some indexing for inflation is included and the tax free allowance stays.

Indexing is fair, but why have an additional tax free allowance - surely we get a personal tax allowance as it is. Does it matter where the income or capital gain arises ?

StevieJ

kennyboy66 wrote: »

Indexing is fair, but why have an additional tax free allowance - surely we get a personal tax allowance as it is. Does it matter where the income or capital gain arises ?

The personal allowance being raised to £10k is good, and hopefully encourage people to fill the low paid jobs, CGT tax allowance is a reward for investing in the economy to provide jobs or even a roof over peoples heads, possible income could easily be losses instead.

StevieJ

I do admit it is quite entertaining to see the Tories stinging their voting public, if we have another election soon they will probably blame the LibDems

amcluesent

Completely muddled thinking from the Liberals. They want to levy CGT at the marginal rate as income tax, BUT want to reduce the CGT allowance to £1000 while raising the income tax allowance to £10,000! Madness.

Just shows that envy drives the Liberals, they can't abide the idea of capital gains, but sweated labour is applauded. Fools.

nollag2006

Outside of this forum, I haven't heard many people talking about it.

Looking specifically at BTL properties, between the generous allowances for the partial periods of main residence, and what was the £40k Residential Let property exemption, the chances are that very few landlords will need to pay any CGT upon disposal of their investment.

Neither of the government parties have said they would change these allowances


There is a very good synopsis of the pre-2007 CGT rules here:
http://www.fool.co.uk/Your-Money/guides/Capital-Gains-Tax-Residential-Property.aspx

Where it is really going to sting is all those folks who are invested in gold, silver, and other commodities. With a greatly reduced CGT allowance, and no income yield from their asset (unlike the rental stream from BTL), they are faced with a massive tax hike.

1984ReturnsForReal_2

Because if you are running your own limited company or get divs from a limited company there will be less to pay out to make people richer.

Entertainer

I've outlined all this before but without repeating it all again- it is not equivalent to income because it is also levied on a whole class of investments that are risk investments where you can lose your money unlike with income where you can only gain. Therefore, make it too punitive and high and you deter vital investment in the economy and raise less tax to boot (50% of nothing is nothing). It is also very complicated and expensive to administer and doesn't raise much revenue anyway relative to to other taxes. How can anyone make a long term investment for the future when they haven't got a clue what the rate is going to be in 10 years time depending upon which ignorant, illiterate politician's populist whim is going to be the prevailing mood?

Entertainer

kennyboy66 wrote: »

Indexing is fair, but why have an additional tax free allowance - surely we get a personal tax allowance as it is. Does it matter where the income or capital gain arises ?

But capital losses can't be offset against income. Someone could have a £30,000 loss from a failed business startup investment and never be able to use it. The Liberals can't have it both ways- go for the equivalence argument of no allowance and top rate of tax but then not allow losses to be offset against income.