Decrease in Capital Gains Tax

The UK government has announced a reduction in the capital gains tax allowance, which will come into effect from the new tax year on April 6th. The change is expected to raise an additional £500 million per year, but it could also impact investors and property owners. The latest budget revealed that the capital gains tax (CGT) allowance will be reduced from £12,300 to £6,150 for individuals and from £6,150 to £3,075 for trustees, effective from April 6, 2023.

The CGT is a tax on the profit made when selling certain assets, such as shares, second homes, or investment properties. The allowance is the amount of gain that is not subject to tax, and any gain above the allowance is taxed at a rate of either 10% or 20%, depending on the individual's income tax bracket.

The government's decision to reduce the allowance has been met with mixed reactions. Supporters argue that the move will help raise revenue for the Treasury and ensure that individuals with larger gains are contributing their fair share to society. Critics, on the other hand, argue that it will discourage entrepreneurship and investment in the UK.

The Federation of Small Businesses (FSB) has expressed concern that the change will impact entrepreneurs and small business owners, who often rely on the sale of assets to finance their businesses. FSB National Chair, Mike Cherry, stated, 'Cutting this allowance, at a time when small businesses are under immense pressure, risks undermining investment, growth and jobs.'

Overall, the reduction in the CGT allowance is likely to have significant implications for individuals and businesses across the UK. While some will welcome the move as a step towards a fairer tax system, others will argue that it undermines investment and entrepreneurship in the country. As the economy continues to recover from the pandemic, the impact of the government's decision will become clearer.

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