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Budget 2014: 12 predictions

by Michelle McGagh on Mar 17, 2014 at 09:10

Capital gains tax

Capital gains tax (CGT) has been pretty much left alone over the past couple of years and while there are no big changes expected, Bull said there could be a freeze in the allowance, which is due to rise to £11,000 for 2014/15 from £10,900.

This does not seem unlikely as the allowance was frozen in 2012/13 at the previous year’s rate of £10,600.

Hargreaves Lansdown said CGT ‘encourages poor investor behaviour’ as it discourages initial investment, ‘provides a barrier to rational trading’ and ‘investors have to pay tax on their indexed gains’.

The group called for the reintroduction of indexing. Currently CGT is 18% for basic rate taxpayers and 28% for higher rate taxpayers but it wasn’t always like this. CGT used to be based on indexation which plotted the real rate of growth on assets and taxed on that basis, not on inflationary growth, meaning tax was paid on a smaller amount of profit.

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