Budget 2010: CGT Watch


Experts have warned that many people could still be hit by high Capital Gains bills, despite the decision to not implement changes to bring rates in line with earnings.

In his Budget earlier on this week, Chancellor George Osborne stated that CGT would stay at a basic rate of 18 percent for taxpayers who are not in the top bracket, where as high taxpayers would see a rise in CGT to 28 percent. This news was met with sighs of relief nationwide but according to accountants there could yet be a sting in the tail.

According to the financial experts buy-to-let investors and second home owners could still be hit by the high rates, even if they pay tax at the basic rate. Frank Nash, of Blick Rothenberg said: “They may well be basic rate taxpayers, but any gains they make on selling an asset is treated by the taxman as if it were income. This could well force them into a higher-rate tax bracket, the majority of long-term property investors will be pushed into the higher tax band”.

This means that an individual on a normal wage, for example £26,000 per year, who doesn’t fall into the high tax bracket, would still face high tax rate if they made more than a profit of £12,000 through a property, as this extra money would propel them into the high bracket.

A senior figure at City law firm Macfarlanes added that: “While the new CGT rate is lower than feared tens of thousands more middle income entrepreneurial savers will be hit far harder than they may have first realised. It will catch all those hard working families who opted for a second home often as an alternative to risking their pension planning in equities. The new system will mean lumpy gains from sales of large assets will push those on lower incomes into the higher 28 per cent CGT bracket.”