Budget 2013: Reduce Capital Gains Tax to encourage investment


As part of a series of blogs previewing Budget 2013, Moore and Smalley financial planning director Laurence Kelly outlines his expectations.


The budget will be meagre in terms of any giveaways due to the ongoing austerity measures, but I would like to see the chancellor take strong action to attempt to stimulate growth.


The recent downgrading of the UK economy by Moody’s, and the resulting loss of our AAA rating, will only increase the political pressure on the chancellor to announce measures that are capable of getting the economy growing again.


As the chancellor has already intimated, I would expect Inheritance Tax to be left alone in the short to medium term to pay for the huge investment in social care the government is planning. However, I would like to see a reduction in the headline rate of Capital Gains Tax to, say, 25 per cent as the current system only discourages saving and investment.


This is backed up by research from the Adam Smith Institute that showed the government’s decision to increase CGT in 2010 actually cost the Treasury income due to people deciding to hold onto assets, rather than sell them, to avoid the higher rate.


Despite recent moves to boost the housing market it remains in the doldrums, especially for first time buyers. Reintroducing MIRAS (mortgage interest relief at source) or another stamp duty holiday for first time buyers is something that could really help and, I dare say, would provide more substantial support than some of the measures already announced, such as the First Buy scheme.


Elsewhere, the very public cases of large scale corporate tax evasion are likely to have spurred the government into increased action in tightening up tax loopholes. I expect this to be a continuing theme throughout the rest of this parliament.