Alistair Darling has announced changes to his proposals for Capital Gains Tax (CGT), following criticism from business leaders.
The Chancellor confirmed that taper relief will be abolished and a flat rate of 18% will be set from 1 April.
However, the Chancellor was forced to make concessions for genuine entrepreneurs and will charge 10% on gains of up to £1m.
The changes were forced by business lobbies who said the changes would unfairly affect entrepreneurs and small businessmen, who previously would have to pay just 10% if they held their assets for at least two years.
However, Darling has been criticised for failing to make the CGT decision clear, making it difficult for business people to plan how they will cope with the tax changes.
Bob Newton, director of Pavis Financial Management, comments: “How can any business owner plan when the chancellor is (like his predecessor) only concerned about sound bites in the commons that create such uncertainty.”
The Association of British Insurers (ABI) has also criticised the move, saying it will create an uneven playing field in the investment bond market.
The ABI says insurance bond income is taxed as income, at 40%, but investment bond income will now be charged at 18%, giving the investment bond market a considerable competitive advantage.
A spokesman for the ABI says: "The Treasury has today accepted that the announcement on CGT created specific and adverse problems for savers and the savings industry. It is vital that the Government now commits itself to resolving these as soon as possible. We will continue to press this case on ministers."
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