UK Chancellor Chops And Changes Over CGT
UK Chancellor George Osborne received quite a bit of criticism for his decision to slash the rate of CGT in his most recent budget in March. This is because it was perceived by his opponents as a tax cut for the rich, as it will largely benefit those wealthy enough to invest and to have built up a company. That may be true, but surely the corollary to that is a high rate of capital gains tax will discourage people from investing and building up companies? And what’s the sense in that when economic times are already uncertain? The UK’s business leaders certainly seem to think this was the right move at any rate, with almost 80 percent telling a recent survey that investing in small companies in the UK would be more attractive as a result of the new CGT regime.
Praise, however, must be qualified. For successive UK Governments have had an almost irresistible urge to tinker with capital gains tax over the last ten years or so, cutting it, tapering it, raising it, then cutting it again. Indeed, this is the second major change that Osborne alone has announced in his time as Chancellor, firstly by splitting the tax into two bands of 18 percent and 28 percent in 2010, then slashing these bands by 10 percent in the 2016 Budget. While the latest move has been welcomed, this chopping and changing, and these regular attempts to pick winners and losers in the tax system, certainly can’t help from a tax planning point of view. Finance ministers seem to like to make their mark on the tax system, but sometimes doing nothing might be the better option. Indeed, many taxpayers might thank them for sitting on their hands for once.
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