David Cameron has hinted he is preparing a climb-down on raising capital gains tax (CGT), after the planned move stoked open rebellion from his own party.
The Prime Minister has said tax rises are necessary to cover an increase in income tax thresholds to around £10,000.
But he suggested upping non-business CGT would only raise 'modest' revenue, and promised to listen to critics in his own party who want longer-term investors to be protected, the Daily Mail reports.
Conservative MP for Haltemprice and Howden, and former leadership contender in 2006, David Davis claimed the blanket rise would hit millions of middle-income savers and second home owners who need to dispose of their assets.
The row over raising CGT to the level of income tax has spiralled all the way to the Treasury, with senior Tory John Redwood writing to the department in protest.
The Conservative MP has been urging the Government to rethink planned rises in non-business CGT, and has written to Treasury minister David Gauke with an alternative way of raising the cash.
Under Redwood's plan, the tax rise would be replaced by a form of taper relief, where the longer an asset has been held, the lower the tax paid.
This is thought to be a potential option being considered by the Treasury.
Business secretary Vince Cable has insisted the coalition government is not split over planned tax increases.
He told the BBC: "It's very important we have wealth taxed in the same way as income.
"At present it is quite wrong and it is an open invitation to tax avoidance to have people taxed at 40% or potentially 50% on their income, but only taxed at 18% on capital gains; it leads to large scale tax avoidance so for reasons of fairness and practicality, we have agreed that the capital gains tax system needs to be fundamentally reformed."
However Christchurch Financial associate director Tony Shah says the linking CGT to income is "grossly unfair".
"People bought property as part of their retirement plans and now find they will be subject to 40% plus tax.
"Those who invested 10-15 years ago in something like property which they can not sell quickly are now stuck."
Shah says Redwood's taper relief alternative is "much more sensible", adding most investments are for the long-term, contrary to the Government's reasoning for the rise.
"There aren't many people who invest short-term. The buy-to-let market will be hit very hard, but generally these people are in it for the long-term."
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