news from our clients

MacIntyre Hudson spots more losses than gains in Capital Gains Tax

22 June 2010

MacIntyre Hudson, the Top 20 accountancy and business advisory firm, was relieved to hear that Capital Gains Tax (CGT) wasn’t as severe as it could have been.

Nigel May, Tax Principal, says: “Thankfully George Osborne has not carried out his threat to raise CGT to 40% or 50%.

“Bringing taper relief back would have meant that long term, middle income, investors (particularly those nearing retirement) would have been less harshly affected by the tax hike and we are not convinced that the simpler ‘lower rate for lower rate tax payers’ reduces the sting for those longer term investors. We are very disappointed to see that the Chancellor has failed to introduce any form of indexation; to tax inflation rather than real growth is unjust.

“And while we welcome the fact that entrepreneurs’ relief is still present in the system, the new 10% rate could mean higher payments. Under the current regime, a £20,000 gain would result in £182 tax payablea and under the incoming regime, it would result in £990 of tax to be paid. This is a sting in the tail of a welcome extension of the allowance to £5m of lifetime gains.

“Overall, though, there will be relief among our clients that the headline CGT rate didn’t increase more steeply.”
 
a Calculations based on a £20,000 gain:
Current regime: 5/9ths is charged, giving a taxable gain of £11,111. Once the £10,100 annual exemption is deducted, this leaves £1,011 to be taxed – at 18% this is just £182.

New regime: Deduct the £10,100 annual exemption to leave a £9,900 taxable gain. At 10% this is £990, which is more than five times as much tax payable.

« Back