CGT changes 'will mean more people are liable'

Date: 22nd August 2008

New data has suggested that recent changes to capital gains rules will mean a third more people are liable for the tax this year.

Skandia has analysed government figures and calculated that reforms which came into force in April mean that 350,000 people will have to pay capital gains tax this year - up from 260,000 people in 2007.

The company explained that the new flat rate of 18 per cent was likely to ensure that higher rate tax payers will have to pay less and that those in the starting and basic rate tax bands will face higher tax bills thanks to the loss of taper relief.

Under the new rules, indexation and taper relief were scrapped in favour of a single rate of capital gains tax.

Skandia calculated that someone who had gained £15,000 after ten years would have paid no capital gains tax in 2007, but will now be liable for a bill of £972.

"The CGT reforms brought in by the Budget are aptly named," Colin Jelley, head of tax and financial planning at Skandia, commented. "They are reforms not reductions; despite the headline rate reduction the government expects the exchequer yield from CGT to increase.

"Many investors will find that whereas previously they would have been liable to pay 40 per cent of nothing, now they are liable to pay 18 per cent of something."