The chancellor’s capital gains hike is not as high as previously feared by investors, according to experts.
Rachel Reeves announced a rise from 10% to 18% on basic rate taxpayers (those who pay 20% tax on their income) and from 20% to 24% for higher rate taxpayers (who pay 40%).
Some reports had speculated she could increase capital gains up to 39%, leaving Simon Gleeson, partner at accounting firm Blick Rothenberg, wondering if the “hysteria” was worth it.
“One has to question: Were all the press releases, the leaks and the hysteria surrounding capital gains tax increases on entrepreneurs and the start-up community really worth it for 4%?”
Tom Golding, corporate tax partner at audit and accountancy firm PKF Littlejohn, added: “There will no doubt be relief that the reports of an increase to as high as 39% have not come to fruition.”
Others were gloomier in their reaction to the figures.
Sarah Coles, head of personal finance at financial services company Hargreaves Lansdown, said the hikes were a “blow for investors”.
“This could have been worse, with suggestions of a doubling of the rate, but it’s scant consolation for anyone hit with a bigger tax bill,” she said.
Frozen income tax thresholds have pushed more people into the higher tax bracket, increasing their capital gains tax rate, she said.
Ms Coles said the increase would make investment less attractive to newcomers and existing investors may focus on tax considerations rather than investments that make the most sense for their circumstances.
“There’s also a danger they may hoard the assets – possibly until their death.”
Those wishing to avoid capital gains tax can invest through a stocks and shares ISA, and money paid into a pension will grow free of the tax, said Ms Coles.
