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Capital gains tax: rise without taper relief will hit savers

Tax experts have called for the reintroduction of taper relief on capital gains.

Capital gains tax: rise without taper relief will hit savers

Smith & Williamson has called for taper relief to be reinstated if capital gains tax (CGT) is increased in line with income tax.

Mike Fosberry (pictured), director of personal financial planning at Smith & Williamson, said business minister Vince Cable is wrong to reject the idea of reintroducing taper relief. Rebel Tory backbencher John Redwood, who is also chairman of Evercore Pan Asset, has objected to the plan to increase CGT and has backed the reintroduction of taper relief - which was removed when CGT was set at 18% in 2008.

‘I don’t accept Vince Cable’s argument that taper relief didn’t work before,’ said Fosberry.

‘Cable is wrong, the taper system had not been there very long. But there is a taper system for inheritance tax that reduces liability where someone dies between three and seven years after making a potentially exempt transfer, and that has worked.'

Without taper relief or an indexation measure to protect from inflation, critics argue, people who have made long term investments for retirement income will be severely penalised.

Adrian Boulding, pensions strategy director at Legal and General, said there was 'a whiff of retrospection about this change.’

‘The Lib Dems say the rate is too low but when the Treasury lowered the headline rate from 40% to 18% they also removed taper relief and indexation and the combined effect was an increase in tax take,' he said.

‘If I could do two things to the policy it would be to reintroduce indexation and preserve the annual exemption. I think that would help protect those with long term investments.'

3 comments so far. Why not have your say?


May 28, 2010 at 13:06

I've been banging the drum about this ever since it was abolished. Taper relief didn't work first time because it wasn't operated properly. The purpose of taper relief should be to reward medium/long term investors. Bringing in maximum taper relief after holding an asset for only two years was plain crazy. Award 15% taper after two years then a further 15% per annum until the asset has been held for six years giving the maximum taper of 75% at that point (business or non business asset should be irrelevant). This rewards those investors who truly wish to invest in a company's future rather than the casino gambling asset strippers that abused the previous taper relief rules.

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colin overton

May 28, 2010 at 20:31

Cable is wrong and a Liberal idiot. Who is going to risk their money on the stock market if the government take the profits when the investment goes well. Taxes will overall drop and drop drastically in the short term. The government will become unpopular and be voted out. Surely even Cameron and Cable can see that tapered relief is fair to reward long term investors. If not they'll be handing the Labour Party a big stick.

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Rob Morrison

May 28, 2010 at 22:40

I have come to the conclusion; it's better to know the facts, before worrying, or rushing to conclusions, or even worse, making rash decisions.

I suspect the CGT could even be @ 25%, which is not unreasonable, given the need for tax revenues.

Ever the optimist, or just misguided!

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