Capital Gains Tax – What Will The Government Do Next?

Ray Stewart General, Tax Matters, VAT 3 Comments

Hi there.  I wasn’t planning a post today but I felt I just had to alert you what our government is up to in the Capital Gains Tax Department.

Not content with pinching other parties policies this week on Inheritance Tax, the Chancellor also announced sweeping changes to Capital Gains Tax from 6th April 2008.  I think there has been massive amount of disbelief from everyone since the announcement but now things are becoming clear.  Business Taper Relief is being abolished and nothing, nothing at all, is planned to replace it.  However, we are supposed to be content that the rate of tax will only be a flat rate of just 18% – that is instead of the gain being added to your income at your highest rate of tax, either 22% or 40%.

Most people pay at 22% so a 4% reduction of the rate is nowhere near compensation for the loss of up to 75% of the gain being reduced by business taper relief.

The Federation of Small Business is starting to rally businesses throughout the country to have this outrageous increase in tax reversed.  But on past behaviour, I don’t think the government will bother themselves too much with the insignificant opinion of it’s subjects.

What does the change mean in actual £’s?

At the moment, if you wanted to sell your business, you can claim a maximum of 75% of the profit as business taper relief.  For example, if you sold for £100,000 profit then business taper relief would reduce that to £25,000 and ignoring everything else you would pay tax at either 22% – £5,500 or at 40% – £10,000.

The new proposal means profit of £100,000 so Tax is 18% – £18,000.

A whopping increase for basic rate taxpayers of 227% (£18,000 – £5,500 = Extra £12,500 or 227% increase).

I will be supporting the Federation of Small Business in their efforts and I strongly urge you to do the same – you will certainly notice the difference when you come to sell up.

I apologize for this sounding like a party political broadcast but we have a right to know what our leaders have in store for us in the stealthy, quiet, way things seem to change these days.

~Ray

Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

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