There are serious concerns that the UK government's attempts to reorganise the capital gains tax system could backfire spectacularly. It seems as though more and more people will be brought under the capital gains tax umbrella thereby increasing government coffers at the worst possible time. Today we hear news that those in care homes, and potentially forced to sell their homes, could fall under the new capital gains tax regime as will many buy to let landlords in the UK.
Over the last few days it has become more and more apparent that HM Revenue and Customs is having major problems with personal taxation for the UK population. It was confirmed today that anywhere up to 100,000 people may inadvertently be paying the wrong tax because of a computer malfunction which has changed many tax codes in the UK. So are you on the correct tax code?
HM Revenue and Customs has today admitted that up to 100,000 people could be out of pocket due to errors in the department's new computer system. It is believed that a number of taxpayers in the UK have seen their original personal tax codes deleted for no reason and replaced with a temporary "high tax code". There are also reports that a number of people have seen an extra "1" placed in front of their income figure boosting their "salaries" by £100,000, which will obviously lead to incorrect tax payments.
The UK government has today hinted at a compromise on the proposed increase in capital gains tax, which is rumoured to be set to rise from 18% to 50%. It is believed that the government will introduce exceptions for entrepreneurs and those nearing retirement as a means of reducing the burden on these two particular areas of society. However, will this be enough for the Conservative rebels?
David Cameron is today facing a potential revolt over his capital gains tax changes, which are yet to be confirmed, with a suggestion that some Tory and Labour MPs will vote against any changes which could see the rate of taxation increase to around 50%. While currently there are only rumours of a concerted effort by both Conservative and Liberal party MPs against the move, there is a growing resentment within the Conservative party.
If there was one member of David Cameron's close-knit team under pressure before and immediately after the election it was George Osborne who many believe is "not up to the job". He was ridiculed by the Labour Party on numerous occasions as various strategists pinpointed him as the potential weak link in the chain of would-be Conservative party Cabinet ministers. However, there is no doubt that George Osborne has taken to the office of Chancellor of the Exchequer like a duck to water but has he grasped the poisoned chalice?
One of the main arguments from the Labour Party ahead of the general election related to Conservative party plans to reduce the public-sector budget deficit immediately. Gordon Brown and Alastair Darling both believe passionately that a reduction in public-sector investment in the short-term will impact upon job prospects, general income and the UK economy as a whole. But is it really too soon to reduce the public-sector budget deficit?
We have had the spectre of capital gains tax in the UK for many years although lately there have been benefits for those who hold assets for the longer term with a reduction in capital gains tax charges. However, when you consider that the 30 leading countries of the Organisation for Economic Co-operation and Development do not have rates of capital gains tax in excess of 30%, if assets are held for over three years, it does begin to reflect badly on the UK.
There is no doubt that capital gains tax will hit the headlines more and more over the next few weeks with rumours of a potential increase from 18% to 50%. However, is capital gains tax a fair tax?
If the UK government goes ahead with plans to increase capital gains tax to potentially 40% or higher this will see the UK with the highest capital gains tax levy in the Western world. This is a situation which was inconceivable just a few weeks ago with the conservatives apparently heading for a majority in the House of Commons. However, the introduction of the Liberal Democrats to the mix has muddied the waters somewhat and David Cameron has been forced to look at tax rises which he would not normally have considered.
