Darling freezes rate of capital gains tax


Capital gains tax (CGT) has been maintained at 18% in the 2010 Budget but relief for entrepreneurs will double to £2 million.

Commentators were expecting CGT to increase in the Budget. However, the 10% concessionary rate for entrepreneurs – introduced in 2009 – will be extended to cover £2 million rather than £1 million of gains.

Towry Law says increasing CGT relief for entrepreneurs to £2 million will encourage wealth creators to invest in UK businesses.

Stuart Law, chief executive of Assetz, adds: “The proposed increase of Entrepreneurs’ Relief is a positive driver to business investment.”

However, there are concerns that maintaining the main rate of CGT at 18% could have a negative impact on the property market.

James Hyman, partner for residential sales at property consultants Cluttons, says: "Keeping CGT at a flat rate of 18% may seem like a boost for the property market, but this is still going to create great uncertainty going forward.

“With the UK facing the prospect of a great deal of belt tightening in the coming years, there will now continue to be the fear of the prospect of a hike at some point in the near future.”

This uncertainty could see second homeowners and investors sell up this year, in order to take advantage of the current CGT rate of 18%.

A concessionary rate of tax for entrepreneurs was introduced in January 2008 as a partial u-turn on plans to scrap tapered CGT.

In the 2007 pre-Budget report, an 18% flat-rate of CGT was unveiled. This was introduced on 6 April 2008 but, as a compromise, owners of small business as well as employees and company directors who own at least 5% of shares in the company were allowed to pay just 10% on any profits under £1 million.