Capital gains tax: how it works, and the pros and cons of a possible hike
As chancellor John Healey prepares a tough budget, capital gains tax has been cited as one option for raising revenue.
Capital gains tax (CGT) has been widely cited as a possible revenue-raising option as chancellor John Healey prepares to deliver a tough budget next month.
CGT is a tax levied on the profit made when an asset that has increased in value is sold, such as shares or property that is not a main home. It differs from income tax, which applies to earnings rather than gains on assets.
Weighing the options
Raising the rate of CGT is regarded as one of several tax levers available to the chancellor as he considers ways to increase government revenue without directly raising more politically sensitive taxes such as income tax or VAT.
Supporters of a CGT increase argue it could raise significant revenue from those who benefit from rising asset values, while critics warn that raising the rate too far could discourage investment or prompt asset holders to delay sales, reducing the tax take.
The debate over CGT reflects the broader balancing act facing the chancellor as the government looks for ways to fund public spending while avoiding measures that could dampen economic growth.
Sources
- Capital gains tax: how it works, benefits and pitfalls of another hike — The Guardian — Business
EGazette summarizes reporting from multiple sources; follow the links for the originals.
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