Budget Preview : Capital gains tax
One issue in the hearts and minds of many investors in the UK is capital gains tax as speculation mounts that the Liberal Democrat party is looking at David Cameron to increase capital gains tax to 40% or perhaps even 50%. There have already been leaks from within the government to suggest this will happen in due course but there are concerns this could lead to a stampede of sellers in investment markets and in particular the property market.
It is unclear exactly how these changes would be introduced, and the overall cost to investors in the UK, but one thing is certain, capital gains tax is going to increase at the next budget. When you consider that capital gains tax is one of the most complicated and expensive taxes for the government to gather it is perhaps a little unexpected to see this increase suggested at such an early stage. While obviously an easy target for an incoming government, the full benefits of an increase in capital gains tax receipts could well be partially offset by higher government costs in administering the tax.
Whether the government decides to tinker with the capital gains tax allowance afforded to every individual in the UK remains to be seen but a straight increase to a rate of 40% or 50% would not go down well.
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