The decline of Capital Gains Tax

London property prices are at new highs. UK share prices have been hitting new decade long highs. Property and unquoted shares around the country have risen in value considerably. It is curious therefore to see a further slump in Capital Gains Tax receipts in the latest January figures.

January is the big month for the Revenue to collect CGT, based as it is on annual tax returns. This January the Revenue collected just £2.45 bn, down by more than a sixth on the £3bn in January 2013. CGT has been running at around half the peak level it reached before the 2008 crash. The interesting thing is the rate was then 18% and the rate today is 28%.

It is quite clear that the new higher rate puts people off realising capital gains. Owners of second properties and holders of shares have plenty of opportunity now to take profits, given what has happened to values. It appears they chose not to. Some may not take profits because they hope values will rise further. Others have instructed their investment advisers, or have decided themselves not to trade, so they do not sell shares that take them over the CGT tax free limit. Owners of buy to let and other properties that are not a person’s own residence also seem to have decided to hold on, in part deterred by the high rate of CGT.

The current rate of CGT is preventing the government optimising its tax take on gains, as the rate is too high to maximise the revenue. It may also be standing in the way of some people moving property into hands of others who might be able to make better use of it. The curious case of the vanishing CGT receipts is more good evidence that a government which needs revenue needs to set realistic rates. It is also more proof that plenty of people avoid tax – in this case by the simple expedient of not selling assets which have gone up in value.

Yesterday’s spending and borrowing figures show the government is making some more progress in cutting the deficit, thanks to rises in revenue from Income Tax, VAT. Stamp Duty and Corporation Tax. There was further confirmation that high earners earn more and pay more at 45% than they did at 50%.

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84 Comments

  1. Mark B
    Posted February 21, 2015 at 6:28 am | Permalink

    Good morning.

    All tax that is collected over and above the Governments needs*, is THEFT !!

    * Doing the minimum in order to function.

    • Andyvan
      Posted February 21, 2015 at 10:37 am | Permalink

      You’re quite wrong. What you should have said is “All tax that is collected is theft.”
      Theft is the taking of something that belongs to one person without their consent. Whether the thief needs it or not does not alter the fact that it is theft. A government is not there to look after us, it is there to extract taxes from us in order to give them to it’s friends and buy enough votes to keep itself in power. The amount of taxation it extracts is also used as collateral to borrow even more to prop itself up and keep the money go round working.
      All the time people believe that the government is a neccessary evil we will continue to be ruled by evil.

      • Mark B
        Posted February 21, 2015 at 11:19 am | Permalink

        Hmm ! Interesting.

        So what about defence, the police and judiciary ? Politicians like our kind host can do the job ‘Part-time’ and for free 🙂

        • Handbags
          Posted February 21, 2015 at 3:05 pm | Permalink

          Apple makes a profit – why can’t countries?

          If the country was properly run it would be paying it’s citizens a share of the profits – not demanding more in taxes.

          When mobsters run a protection racket most people can see it’s wrong – when governments do it somehow it’s considered to be a moral duty to pay. No it isn’t, it’s the same thing, it’s parasites sponging off the efforts of hard-working people.

          • Lifelogic
            Posted February 21, 2015 at 5:24 pm | Permalink

            Above about 25% of GDP it is indeed very close to a protection racket as you say. If they took just 25% of GDP them might well have nearly the same money as it could be a GDP that was perhaps 50%+ larger.

          • Jerry
            Posted February 21, 2015 at 5:57 pm | Permalink

            @Handbags; “If the country was properly run it would be paying it’s citizens a share of the profits – not demanding more in taxes.”

            We are told that a country has no money of its own, individuals and companies do and the state then imposes taxation to obtain the money required to provide services that an individual or company can’t or for what ever reason is not best placed providing (a private armies anyone?!), so the only way a country can “make money” that can then be given out to the citizens as a share of the profit would be if the state owns and runs the means of production -that phrase sounds strangely familiar- oh yes, I know, it’s the basis for communism….

      • Bazman
        Posted February 21, 2015 at 3:30 pm | Permalink

        Using state infrastructure, security and services without payment is also theft in that case in your deluded simplistic world. Do you have a job?

        • Lifelogic
          Posted February 21, 2015 at 5:26 pm | Permalink

          The things governments need to do and can do better than individuals, charities and businesses can easily be funded on 20-25% of GDP.

          • Bazman
            Posted February 22, 2015 at 10:23 am | Permalink

            Like roads? Are you going to pay for tolled roads? Answer or shut up. You have just made up 25 % with no evidence.

          • Edward2
            Posted February 23, 2015 at 8:41 am | Permalink

            Roads are paid for by vehicle excise duty whch all vehicle owners have to pay.
            In fact the amount of money raised by this tax is more than is spent on roads.
            So your toll roads jibe is wrong Baz.

          • Bazman
            Posted February 23, 2015 at 7:18 pm | Permalink

            Most who are in favour of NHS charges against toll roads and the abolition of fuel duty and road tax edward. Road tolls would be much more efficient and an effective way of funding the roads. The fact they would have to pay to drive and they do not like it is the point I am making. They think they are getting roads for nothing and fuel is a rip off.

          • Handbags
            Posted February 24, 2015 at 2:33 pm | Permalink

            I suspect a minimalist administration would cost even less than 20-25%.

            Scrap all taxes and duty – and simply pay VAT – that means everyone will pay on their private spending, winners and losers alike.

            At least with one simple tax – call it Government Tax – people can see how much the Government actually costs.

          • Bazman
            Posted February 26, 2015 at 8:12 pm | Permalink

            So by maths alone Handbags, the poor have to pay a lot more as a percentage of their income for everything and VAT would have to be on everything at a high rate or their would be massive cuts affecting the peole using the services without money to pay?
            Are you OK with that or just stupid?

    • Jerry
      Posted February 21, 2015 at 11:22 am | Permalink

      “Mark B; First you need to define “Governments needs”, only then can you have a rant about government theft…

      @Andyvan; “Theft is the taking of something that belongs to one person without their consent.”

      That makes a purchase tax, and perhaps CGT (because the payee has chosen to use capital as an investment), as very fair taxes, so perhaps there should be close to zero income and corporation taxes but hight PT and CGT as both taxes are taken with the -hopefully, informed- consent of the payee?!…

      Oh and government is more than a tax collector, one could have a totally zero rate of tax within a country but government would still be necessary evil.

      • Mark B
        Posted February 21, 2015 at 7:12 pm | Permalink

        True, we do have to determine what Government should and should not do.

        But as you raised it, what things do you think government should and should not be doing ?

        • Jerry
          Posted February 21, 2015 at 9:19 pm | Permalink

          @Mark B; “But as you raised it, what things do you think government should and should not be doing ?”

          Err, you’re the one complaining that the government is stealing your money, what do you think they should be doing or not?! But asd you’ve asked me;

          Defence, Health (inc care), Education (inc. Higher), Emergency and most Social services. On top of those there should be central planning/regulation for Transport and Energy. Those are the core, not an exclusive list.

          The fact is though, the UK government could carry on doing much the same as they are but if substantial savings at the top of the pyramid so to speak were made this alone would create the possibility of either significant tax reductions or significant improvements to the services provided, the pages in our hosts virtual diary are full of comments about management waste and loss in the NHS just for starters…

        • Hope
          Posted February 22, 2015 at 1:11 pm | Permalink

          The key point is that taxation has cut the deficit when we were promised 80 percent spending cuts 20 percent tax rises. It is more like 95 percent tax rises and 5 percent spending cuts! Another broken promise by guess who?

  2. Lifelogic
    Posted February 21, 2015 at 6:53 am | Permalink

    Income tax at 45% is still far too high, keeping it as 50% for so long was idiotic and damaged the economy and even tax take. CGT at 28%, without even an allowance for inflation, is also far to high, even for maximum revenues. The government should not be aiming for maximum revenues but maximum good for voters which a far lower rate.

    The fist thing the government needs to do is stop pointless expenditure and the over remuneration in the state sector (about 150%). It is clear that about 50% of what the UK government spend is wasted, pointless, damaging or could be done far better by others.
    Start with the EU costs, the greencrap grants, subsidies for electric cars, the propaganda units and firing the countless bureaucrats who do nothing of any use or far often worse.

    • fedupsouthener
      Posted February 21, 2015 at 2:06 pm | Permalink

      Why not have a higher rate of tax for landowners raking in thousands of pounds a year from wind turbines on their land? With 5 or more turbines they are set to ‘earn’ millions in 25 years. All this come from the pockets of hard pressed energy users both domestic and commercial. Money for nothing!

    • turbo terrier
      Posted February 21, 2015 at 3:02 pm | Permalink

      Well said Lifelogic.

      “Start with the EU costs, the greencrap grants, subsidies for electric cars, the propaganda units and firing the countless bureaucrats who do nothing of any use or far often worse”.

      All these sudsidies for the green stuff which supports landowners let alone the developers should be taxed at 80% at least and the money raised given to essential areas of living within the UK.

      Many one man bands out in the real world try and work on 30% uplift to make 20. Why should these leeches be any different?

      British Gas are going to shut power stations as they are not economical only because the CC Act gives priority to turbines and at best they are only working at 50% capacity at best or even less. Complete utter madness

  3. Richard1
    Posted February 21, 2015 at 8:09 am | Permalink

    Yet more hard evidence for the Laffer curve effect, denied so virulently by leftists, and even it seems not really understood by Messrs Cameron and Osborne. I hope the explanation as to why CGT has been held up at this uncompetitive and suboptimal rate is gesture politics – they know it’s not the best thing to do but it sends some sort of message to floating voters. Likewise the 50p rate which is clearly also damaging incentives and therefore lowering receipts.

    (Likewise presumably also overseas aid and green crap – we must be careful the tail doesn’t wag the dog and gesture policies become more significant than properly thought through pro market policies!)

    • acorn
      Posted February 21, 2015 at 11:51 am | Permalink

      It is nothing to do with Laffer, its called “forstalling”. Osborne’s CGT hike was well publicised months before his June 2010 Budget hike. Tax specialists and HMRC have written that this pulled forward a lot of 2010 – 2014 planned disposals. Also, it had been hinted that in 2009-10, that Osborne was considering higher CGT rates for higher rate taxpayers prompting disposals in this income range.

      The percentage of individual CGT taxpayers with gains with a taxable income over £100,000 was between 16% and 18% for all years apart from 2009-10 when it increased slightly to 20%. The amount of gains for disposals in this income range increased from 49% to 55% of all gains in 2009-10 then dropped back to between 48% and 49% for 2010-11, 2011-12 and 2012-13.

      There is now an expectation of CGT changes after the election, hence lower CGT collections this January. To achieve his “fiscal surplus” by 2019/20, Osborne will need the private sector to spend more of its savings and take on more debt to replace the “deficit” spending and pay for the imports. We will start to look more like the Eurozone financially.

      Reply The peak CGT year was 2007-8 not 2009-10. Clearly property and share values have an impact on CGT, and we are now at or above the 2007-8 peaks again but nowhere near on tax receipts. I can assure you many people with money simply hold rather than pay when the tax is as high as 28%.

      • Richard1
        Posted February 21, 2015 at 4:32 pm | Permalink

        CGT at 28% is a a major disincentive as is shown by the Labour govt feeling obliged to allow £10m of gains for qualifying entrepreneurs at 10%. Recycling of capital is good – whether its investors and entrepreneurs exiting investments and moving on to the next thing or people selling houses. High tax distorts decisions and prevents or disincentivises further entrepreneurial activity. The idea as stated above that people were able to bring disposals forward by several years is plainly absurd for anyone who has ever been involved in investing in a business.

        This has everything to do with the Laffer curve effect.

    • Bazman
      Posted February 21, 2015 at 3:29 pm | Permalink

      We have talked about the Laffer curve before the Laffer Curve does not say whether a tax cut will raise or lower revenues, nor does it predict that any and all tax rate reductions would necessarily bring in more total revenues. Instead it says that tax rate reductions will always result in a smaller loss in revenues than one would have expected when relying only on the static estimates of the previous tax base. The Laffer Curve does not say that “all tax cuts pay for themselves” as many people claim.
      Often these theoretical rules do not apply in the real world. Many predicted Armageddon should a minimum wage be introduced. That did not happen and almost all now agree it is sensible thing to have if you do not want the state to subsidise companies more than what they do or the lower end of the workforce to live like tramps.

      Reply A Laffer curve simply plots and shows the trend of tax revenues for any given rate of the tax being studied. The inflection point is the point at which raising the rate means you then collect less not more. Clearly 17.5% for VAT was well below the inflection point, so raising that rate increased tax revenue. Raising CGT to 28% and Income tax to 50% clearly took those taxes above the inflection rate, so the Treasury collected less.

      • Jerry
        Posted February 21, 2015 at 6:12 pm | Permalink

        @JR Reply; “Clearly 17.5% for VAT was well below the inflection point, so raising that rate increased tax revenue.”

        Does that mean that the Brown/Darling drop in VAT from 17.5% to 15% during their last year(s) in office didn’t raise any extra revenue for HMT, although it was obviously good for traders attempting to move their stock, or could have keeping VAT at the lower level or indeed a further reduction increased revenue. I ask because VAT is not always about pure revenue income, a high rate might well encourage people to save or multiple rates can shape purchasing decisions, didn’t Denis Healey use VAT in the latter way during the late ’70s?

        • Mark
          Posted February 22, 2015 at 3:16 am | Permalink

          Yes it does. VAT rates changed with the calendar year effectively. The receipts in 2009 when VAT was 15% were just £68.6bn, £80.9bn in 2010 at 17.5%, and £95.2bn in 2011 at 20%.

          • Jerry
            Posted February 22, 2015 at 10:02 am | Permalink

            @Mark; I assume those figures are based on like-for-like sales, thanks.

      • Bazman
        Posted February 21, 2015 at 8:37 pm | Permalink

        The inflection point was regressive. A point lost on the Tories and says it all.

  4. Ian wragg
    Posted February 21, 2015 at 8:18 am | Permalink

    If I realised my recent gains I would spend some of it downsizing to a better area. As the greedy government wants large portion of it to help India with its space programme and building carriers, I’ll stay put.
    It would appear that Greece has a stay of execution for a few weeks then it’s back to the table. They don’t have a snowball in hells chance of meeting the conditions.

    • Mark B
      Posted February 21, 2015 at 11:28 am | Permalink

      Can kicked.

    • Max Dunbar
      Posted February 21, 2015 at 12:09 pm | Permalink

      Too true about Greece Ian. It’s 1930s Spain all over again. All that will happen is that a more extreme and turbulent period will result from this stay of execution. The EU busy making things worse while Putin smiles.

    • Jerry
      Posted February 21, 2015 at 8:13 pm | Permalink

      @Ian wragg; “It would appear that Greece has a stay of execution for a few weeks then it’s back to the table. They don’t have a snowball in hells chance of meeting the conditions.”

      Well if they don’t meet the conditions then it’s not a few weeks, more like a couple of day, most likely Midnight CET on Monday, if so the following five days will be “interesting” to say the least!

  5. Mondeo Man
    Posted February 21, 2015 at 8:41 am | Permalink

    To avoid CGT on a BTL investment you move into it as your first residence for a specified amount of time. Though friends tell me this can be problematic and cause them to hold on to their assets rather than sell them.

    The rental yield can be too good to lose. Especially where some poor kid in the South East is trapped spending £1400 a month to live in your hovel.

    HTB is no good either. It may be helping to increase start-ups but that is causing people to pay more for houses than the unsubsidised market could bear. It adds to the nation’s debt.

    Homes were never meant to be commodities – or ‘popety’ as the house price ramping shows call them.

    A nation of renter serfs with a minority landlord class. No wonder Conservative membership is falling.

    There is too much subsidy going on in Britain. And by that I mean on everything. We are living on borrowed money and, therefore, borrowed time.

    • Mark B
      Posted February 21, 2015 at 11:32 am | Permalink

      They have a high rental to ownership on the continent don’t-ya-know. All the better to assimilate into a ‘Common Market’.

      As for subsidy, we are back to the 70’s. With the 80’s style recession to follow.

      • Mondeo Man
        Posted February 21, 2015 at 5:17 pm | Permalink

        Mark B – on the Continent they’re not paying 60% of salary to rent and working all the hours.

  6. stred
    Posted February 21, 2015 at 8:44 am | Permalink

    By raising the rate of CGT and keeping the removal of indexation, Mr Osborne has in effect introduced a stealth wealth tax on any asset increasing in value over £10k . This tax starts at a value lower than wealth tax in France and other countries. Over 20 years the owner will become liable for 28% on the whole original sum, if the asset increases in value along with inflation. Presumably, the Treasury is aware of this and politicians hope that only a few voters will notice that a Conservative government has brought in this socialist measure, without any reference to their manifesto comittments.

    • oldtimer
      Posted February 21, 2015 at 10:25 am | Permalink

      Of course the Treasury and Mr Osborne are aware of what they are doing. But it is both stupid, because it is ineffective, and immoral, because it captures for the tax man all the effects of inflation. And we need to remember that inflation is government policy. Governments need inflation to devalue their debts and to benefit from fiscal drag.

      It is obvious to anyone with a potential CGT liability to do all possible to minimise it. That is distorting the market in such assets, including housing. If the government had any sense, a big ask on anything to do with taxation, it would reintroduce the 18% CGT rate and see its CGT income soar.

  7. eeyore
    Posted February 21, 2015 at 8:50 am | Permalink

    You’re quite correct that 28% CGT deters dispersal of assets and so diminishes HMG’s tax take. I know this from my own experience. How long, one wonders, before NOT selling assets is branded as tax dodging and attracts the avenging fury of Mrs Margaret Hodge?

    Students of AP Herbert’s Misleading Cases will recall a pertinent and prescient case. A man who disposed of all his property and lived off the cash specifically to avoid having a taxable income, was “deemed” to have an income, and taxed accordingly.

  8. Matt
    Posted February 21, 2015 at 9:05 am | Permalink

    It is a rather depressing failure of politics is it not, that the case for setting lower rates even when doing so increases revenue is so hard to win. I find it unlikely that anything other than a very small minority of our 650 elected representatives under any illusion on this matter. Yet the higher rate remains in place depressing the economy and reducing both short term and long term tax revenue needed to help bring a chronically overspending state into financial balance.
    Yet I understand it. A majority of the public would, despite the logic of the matter, be less inclined to vote for an MP who supported a cut in either CGT or the top rate of income tax. Therefore any MP doing the right thing on this matter risks being sacked for it.
    Perhaps the problem is the quality of the public debate on politics in general. So often the evidence is excluded and two opinions on a matter are given equal weight in the press even if one is evidence based and the other is political opportunism.

    • Lifelogic
      Posted February 21, 2015 at 10:12 am | Permalink

      Indeed Cameron and all the parties impose rates that they must know damage jobs and the economy. They do this just because it makes them look like they care about the poor (even though it actually damages the poor in reality) and they like wasting other people’s money on drivel. Keeping the 50% for so long was hugely damaging & a total outrage.

      It is immoral to tax at such high rates and does positive harm. As with the Greencrap idiotic subsidies I do not even think it helps in terms of votes in reality – but then they are politicians so one rather expects such evil politics on envy stuff at least from the left. But not the Tory party are clearly of the “tax borrow and piss down the drain” left too.

      • waramess
        Posted February 21, 2015 at 11:37 am | Permalink

        Immorality has absolutely nothing to do with either tax avoidance or the rate of tax charged.

        If we wait for politicians to show us the definition of morality then we will have to wait for a very long time as the expenses debacle shows us.

        Certainly neither Cameron nor Osborne have any idea.

    • Bob
      Posted February 21, 2015 at 12:23 pm | Permalink

      @Matt

      ” the problem is the quality of the public debate on politics in general”

      Any challenges to the high rate dogma in the press are usually hidden away in the comments sections on the blog pages.
      We have a public service broadcaster whose charter requires it to educate, inform and entertain, and yet they have never bothered to employ even a small fraction of their immense resources to explore the Laffer Curve vs high rates, but if they did, I suspect that it would be as balanced as last weeks C4 program on ukip’s first 100 days in government.

      The collectivists rely on perpetuating the green eyed monster to keep themselves in situ. I find it strange that they are not concerned with Lottery winners who suddenly receive a hundred million unearned pounds, or footballers that earn 250k a week, but a successful business owners who provide jobs and services to their willing customers need to be punished for having the temerity to be better off than than someone on the dole.

      • Jerry
        Posted February 21, 2015 at 8:34 pm | Permalink

        “Bob; “We have a public service broadcaster whose charter requires it to educate, inform and entertain, and yet they have never bothered to employ even a small fraction of their immense resources to explore the Laffer Curve vs high rates”

        Except they have done just that, and without any bias (a few years back now admittedly) but if you only ever check the ‘tabloid’ channels and music stations output you’re very likely to miss such PSB programming! One of the reasons I actually favour the BBC divesting its self from such tabloid channels and pop music stations so that it doesn’t need to justify its self via audience share etc. and can thus concentrate on a more pure PSB output, at a considerable saving on the TVL fee too…

        • Bob
          Posted February 21, 2015 at 9:30 pm | Permalink

          @Jerry

          “Except they have done just that”

          Oh really? What did they conclude?

          • Jerry
            Posted February 22, 2015 at 10:08 am | Permalink

            @Bob; They didn’t “conclude” anything, it was an explanation of the Laffer Curve, amongst other taxation issues and theories!

          • Bob
            Posted February 22, 2015 at 10:06 pm | Permalink

            @Jerry

            “They didn’t “conclude” anything, it was an explanation of the Laffer Curve, amongst other taxation issues and theories!”

            A bit pointless then. £3.6 billion a year eh! What a waste of taxpayers money.

          • Jerry
            Posted February 23, 2015 at 8:06 am | Permalink

            @Bob; “A bit pointless then.”

            That comments says far more about your own grasp on the reality and requirements of education than it does the BBC’s! In your opinion should teachers impart factual knowledge or propaganda (for one side of an argument or other)?…

          • Bob
            Posted February 24, 2015 at 12:59 pm | Permalink

            Factual knowledge every time Jerry, but it never stopped the BBC concluding that the “science was settled” etc. The BBC makes all kinds of conclusions on all sorts of issues, like equality, economics, history and science, but in the case of the Laffer Curve despite historic evidence of lower rates resulting in more revenue they cannot conclude anything. Why don’t you take off your blinkers for once?

          • Jerry
            Posted February 24, 2015 at 6:03 pm | Permalink

            @Bob; What ever…

            Must remember that Bob is not actually interested in either a serious debate about the BBC, just anti BBC rants that have little if anything to do with the facts.

          • Bob
            Posted February 27, 2015 at 10:08 am | Permalink

            @Jerry

            “whatever”

            You’re beginning sound like Kevin the teenager.
            That is so typical of your contributions, you accuse everyone else of ranting and avoiding facts, while being guilty of those very things yourself.

        • libertarian
          Posted February 21, 2015 at 10:50 pm | Permalink

          Jerry

          For once I actually agree with you. The BBC should indeed concentrate on PSB output with maybe one channel of drama & “culture”

          The BBC’s domination of radio airwaves is totally detrimental.

  9. Margaret Brandreth-J
    Posted February 21, 2015 at 9:38 am | Permalink

    CGT is higher today at 28% and the revenue is considerably less . As you say, they are playing the system thus avoiding paying at the higher rates.The very high foreign investment in flats and other accommodation in London may be simply that though,a long time investment rather than a short harvest.

  10. Lifelogic
    Posted February 21, 2015 at 10:02 am | Permalink

    You say:- The current rate of CGT is preventing the government optimising its tax take on gains, as the rate if too high to maximise the revenue. It may also be standing in the way of some people moving property into hands of others who might be able to make better use of it.

    Indeed but governments should not even be trying to optimise its tax take it should be taking only the circa 20% of GDP it actually needs to do the very few things that governments can do better than individuals. It should be maximising good for the electorate not trying to grab as much as it can only them to waste most of it.

    SDLT (and sometimes CGT too) is a huge fiscal barrier to moving. IHT is dead money, it might well cost upwards of £200K in dead money to move from one place to another (in agents fees, legal fees, valuations, sdlt and the rest. Perhaps taking many years for the new property to even reach the price you paid for it with costs. Best to adapt/extend the old one in most cases.

    • Lifelogic
      Posted February 21, 2015 at 10:18 am | Permalink

      Or you can rent a new property and rent out the old one instead (saving SDLT but then later you get caught by some CGT on a portion of the old one after a few years it used to be three but they have reduced it I think). The tax laws should be fiscally neutral between buying or renting – it is very far from it. IHT at an absurd 40% is a further huge distortion to rational decisions.

      • Lifelogic
        Posted February 21, 2015 at 1:37 pm | Permalink

        There is no CGT on death though, just Osborne’s outrageous 40% IHT over 325K instead. Given the blatant IHT ratting by Osborne and Cameron. Still no statement on what they will do next time in the rather unlikely event they do get back in. When will they finally make some fiscal statement only 70 odd days left.

        It is no good all claiming to be reducing taxes or be a low tax tory at heart, when you have put them up hugely 299+ times and ratted on IHT – no one is fooled. With Cameron types I always assumes they will usually do the opposite of what they say, that way one is rarely surprised by this contemptible, election throwing, man.

  11. Bert Young
    Posted February 21, 2015 at 10:16 am | Permalink

    Why sell property when its value (and the yields therefrom ) are the best available ?.No matter how one forecasts , property scarcity and the rate of building do not equal each other ; until this happens , equity holdings in shares will not measure up . If HMRC are concerned they must look to alternative forms of revenue .Lowering the tax rate has always produced better results .

  12. Duksue
    Posted February 21, 2015 at 10:31 am | Permalink

    Surely 28% CGT was a LibDem thing along with binning Steely George’s IHT promise. Serves them right. Top rate of income tax must work out at nearer 60% with the removal of the personal allowance? I would vote for a massive simplification of our hideously labyrinthine and patronising tax system.

    • Lifelogic
      Posted February 21, 2015 at 1:40 pm | Permalink

      Any why do we have the Libdems? It is all thanks to Cameron’s ratting, broken compass and his giving equal TV billing to the dreadful Clegg – at best another and probably even worse coalition looms.

      Worse of all one with the SNP as king makers for Miliband.

      • fedupsouthener
        Posted February 21, 2015 at 2:11 pm | Permalink

        We all thought Clegg and Co was bad enough. Wait until we get Salmond/Sturgeon. We aint seen nothing yet!

        • Lifelogic
          Posted February 21, 2015 at 5:37 pm | Permalink

          Indeed Miliband and the two fishy characters Salmon & Sturgeon sounds appalling – even relative to Cameron.

      • Jerry
        Posted February 21, 2015 at 8:47 pm | Permalink

        @LL; Most people moved from Labour to the LDs in 2010, very few Tories moved to the LDs, so had the LDs not done as well as they did there would have been a clear Labour majority and Mr Brown would have had a clear run the last five years. The party that took Tory votes was UKIP, and Mr Farage even boasted about the fact the morning after.

        @fedupsouthener; Indeed, and the more votes UKIP take from the Conservatives the more chance there is of a Labour + SNP government.

        • Denis Cooper
          Posted February 22, 2015 at 9:55 am | Permalink

          No such things as “Tory votes”.

          • Jerry
            Posted February 22, 2015 at 10:22 pm | Permalink

            @Denis cooper; The election polling stats suggest otherwise, unless you are being pedantic with the use of Tory vs Conservative…

  13. bluedog
    Posted February 21, 2015 at 10:37 am | Permalink

    Both CGT and its even more unpleasant cousin Estate Duty are nothing more than taxes on the debasement of the currency. As the purchasing power of the pound in your pocket plummets over the decades, a nominal and taxable gain is recorded on any tangible asset. Not only has it long been HM Government policy to allow inflation to reduce the value of its debts, but since the imposition of CGT fifty years ago, the government has compounded insult with injury by confiscating part of the nominal profit its own feckless policies have caused.

    Even more remarkable is that the electorate continues to tolerate this dishonesty without rising in civil revolt. Not even UKIP seems prepared to speak out against the racket.

    That the electorate appears to be doing everything in its power to avoid being entrapped by these taxes is completely understandable.

  14. Ex-expat Colin
    Posted February 21, 2015 at 10:40 am | Permalink

    So if I continue to do the exact reverse of what any government inflicts I would still be right. Thats within the law of course, but strange/unexpected things are put into law.

    Its why I went expat for 10 years…just to shake off the burden of what governments want to do. I went to places that were much less burdensome. Only to return to the same old problems plus plenty more.

  15. Jerry
    Posted February 21, 2015 at 11:09 am | Permalink

    John, you write as though your party has been in opposition for the past all but five years, when in actual fact there has been a Conservative Chancellor at least in residence at No. 11… Surely this ‘excessive’ CGT is not all the fault of the LD’s within the coalition?!

    Reply Lib Dems wanted to put it up to 40% and 28 was the compromise.

    • JoeSoap
      Posted February 21, 2015 at 5:14 pm | Permalink

      So perhaps you should have gone into coalition with Labour?

  16. waramess
    Posted February 21, 2015 at 11:27 am | Permalink

    I wonder what the government will do if its tax receipts (income) falls short of expectations?

    If already overborrowed, the rest of us would cut expenditure.

  17. agricola
    Posted February 21, 2015 at 12:57 pm | Permalink

    As I said yesterday , to try to justify any level of tax is to start at the wrong end of the problem. At present you allow government to decide on the level of interference in peoples lives and then you dream up ways of paying for it. No facet of government interference is put to the electorate except in the most woolly and general terms every five years, whereas it should be the subject of a referendum a la Swiss. This results in the interference becoming a policy devoid of consent which by the nature of the beast grows to satisfy the power needs of a government department. It then has to be funded, so a tax is invented or an existing one enhanced just to feed this undemocratic whim.

    The starting point should be, what do we want government to be doing and what would we be much better doing ourselves. With such a premiss the size of government can be vastly reduced and the people can have much greater disposable income and wealth, to the ultimate benefit of the economy and peoples self esteem. That which individuals contract for becomes a multi choice series of businesses which have to compete for business. The result being that the people are likely to get a much better deal than they would for the same thing via government.

    The existence of Capital Gains Tax is just a symptom of the problem as are Stamp Duty, Inheritance Tax, National Insurance (Tax), and the high levels of VAT and Income Tax.

    Those that decry monthly referenda have not woken up to the internet, just as the HoC wastes time wandering through corridors and rooms just to vote yes or no when the press of a button would solve the problem.

  18. The Prangwizard
    Posted February 21, 2015 at 1:05 pm | Permalink

    This is quite a problem for your leadership. Dave, who used avoidance and evasion in the same sentence without distinction in PMQs recently, and his friend George, are ‘cracking down’ on avoidance. Surely holding on to assets is deliberate and calculated, and consequently immoral?

    Perhaps they should demand these selfish people should sell, after all they are distorting the market too and forcing up prices. If Red Ed says something like that, Dave is sure to follow. There is not much difference between the two of them and Nick, having all signed up to more green crap just lately too.

    Dear readers, do not vote for either of these three parties, there is no significant difference, and don’t forget there will be five more excruciating years with no way out.

  19. ian
    Posted February 21, 2015 at 1:12 pm | Permalink

    What you want is no income tax and gambling tax CGT brought down to 15% then 10% and then 7% t0 5%, with having the tax so high you are doing away with the fun, we do not pay that amount of tax to bet on the horses or the dogs. IT all this isms brain washing. Only non enties should pay tax corporation, companies, and small business. People should not pay working taxes, gambling tax is fair game.

  20. petermartin2001
    Posted February 21, 2015 at 1:18 pm | Permalink

    One simple question and one multiple question:

    1) I suppose Government could impose a tax on the increased value of assets on an annual basis instead of waiting for them to be sold. Is there any particular reason why taxation should always be levied on financial flows rather than financial stocks?

    2) Governments in the UK nearly always run budget deficits. Even Margaret Thatcher’s government ran a deficit for all but a couple of years in the Lawson boom years. The UK runs a trade deficit too. Trade deficits are rarely mentioned these days. They are deemed to be less important. Would you also agree, however, that the practical evidence is that countries which have a surplus in their exports also tend not to have a budget deficit problem? Does this suggest that we are tackling our budget problem (if there is a problem) in the wrong way, and that we should be looking to have a better trade position by lowering the value of the pound?

    1. Taxing an asset you need when you do not have the money to pay the tax is far worse than taxing you when you sell it and do have money and can budget for the tax.

    2. Your approach to sector balances summing to zero always ignores the private corporate sector and private individuals. Their surplus or deficit also has an impact or mirrors the state and balance of payments deficits. One ay of getting the state deficit down would be to tax the private sector surplus more – another way is for the state to spend less! It need not be an adjustment to the balance of payments. Devaluing does not always eliminate a deficit, as it depends on the price elasticity of imports versus exports. The UK has done quite a bit of devaluing over the years.

    • Denis Cooper
      Posted February 21, 2015 at 3:32 pm | Permalink

      On your 1), levying an annual tax on as yet unrealised profits would be even worse in distorting investment decisions than levying a tax on profits actually made on sale when the money would be available to pay the tax – eg, would you think it right for somebody to be forced into selling some of their holding of a particular company share just to be able to pay the tax on their notional gains? And if the share price fell in the following year, would you then expect the government to pay the investor a proportion of his notional losses?

      • petermartin2001
        Posted February 22, 2015 at 3:42 am | Permalink

        Denis,

        I asked question (1) but I’d just like to make the point that I too don’t think it is really necessary at the present time. But I’d also make the point that I’m not “ignor(ing) the private corporate sector and private individuals” in my consideration of the sectoral balances as John said in his reply to me above.

        If Government needs money to close its deficit it has to come form either the overseas sector, by increasing exports/reducing imports,, or it has to come from the domestic sector either by increasing taxes, and to get those taxes will require a considerable tightening of how taxes are collected along the lines of this suggestion.

        Or, as John says, government has to spend less. But, this makes the private sector poorer too. As the UK runs a trade deficit, ALL the money that is available to the private sector comes from government spending. NONE comes from the export sector. In fact its less than nothing – its negative! Money drains out to pay for imports.

        It is quite clear that the only way any government can run a sustainable budget surplus is to run a trade surplus too. John makes the point that he doesn’t believe that needs a devaluation of the currency. He could be right on that. But, still, Government needs to do whatever it takes to run that export surplus.

        That’s what Germany, Holland, Denmark Switzerland etc does and that’s what Britain needs to do too, if it so keen on ‘balancing the books’.

  21. Denis Cooper
    Posted February 21, 2015 at 1:34 pm | Permalink

    I’m much less bothered about the government getting lower CGT revenue than about the constant gross distortion of saving and investment decisions being made by millions of fairly ordinary people because of the irrationality of the present CGT system.

    This applies particularly to the capital gains made on shares and other securities rather than those made on property, although the tax treatment of the first can drive people to invest in the second when otherwise they would have not chosen to do that.

    With the connivance of the Treasury, and also HMRC, there is a substantial and highly lucrative “industry” dedicated solely to devising and selling “financial products”, that is to say unnecessarily complex saving and investment schemes, with the main purpose of trying to avoid taxation which is basically irrational in its design.

    Many of the complications faced by families in trying to organise their finances could be instantly removed by these two simple measures:

    1. Disaggregation of “earned” and “unearned” income for tax purposes, with a separate annual personal tax-free allowance for income from savings and investments; and

    2. Permitting all unused annual CGT allowances to be rolled over for use in future years with annual uplifts for general inflation, thus removing the pressure to either make full use of the allowance each year or enter into complex schemes.

    I will add a third irrationality here, one which I highlighted in a comment on an earlier thread, that the tax levied on a legacy received by one person depends on the total value of the legacies received by all of the beneficiaries, that is to say on the value of the estate, leading to the absurdity that (some people ed – I do not know the tax circumstances of the person you named so will not publish it in any form ed) could legitimately avoid IHT simply by getting a deed of variation for their father’s badly written will.

    We carry on with these fundamentally irrational tax systems year after year, government after government, even though only a little fresh thinking provides obvious solutions; it can only be that the government actually prefers absurd complexity to a simplicity which would relieve millions of people of the need to spend time and effort and money trying to negotiate or circumvent the systems, and a cynic might say that this can only be because they like to make profitable work for the financial services “industry”.

    • Denis Cooper
      Posted February 21, 2015 at 3:23 pm | Permalink

      Well, it was a Tory MP who first highlighted the case to which I referred!

  22. Bob
    Posted February 21, 2015 at 1:37 pm | Permalink

    “It is also more proof that plenty of people avoid tax – in this case by the simple expedient of not selling assets which have gone up in value. “

    George Osborne describes those people as “morally repugnant”.
    I wonder if they’ll remember that when they place their “X” in the box on May 7th?

    • JoeSoap
      Posted February 21, 2015 at 5:12 pm | Permalink

      Indeed, we will all be thinking “Sell assets, pay tax, vote Conservative”. Not.

  23. forthurst
    Posted February 21, 2015 at 1:38 pm | Permalink

    “…as the rate if too high to maximise the revenue.”

  24. Denis Cooper
    Posted February 21, 2015 at 1:51 pm | Permalink

    Off-topic, I don’t recall it ever being said that if we joined the Common Market that could make it illegal for the UK to permit three parent babies forty years later:

    http://www.telegraph.co.uk/news/11425602/Three-parent-babies-Britain-has-breached-EU-law-MEPs-warn.html

    As I recall it was primarily about the benefits for our exporters when continental markets were fully opened to them, and nothing at all about the national laws we would have for fertility treatments; so how has that crept in, and who allowed it to creep in?

    • agricola
      Posted February 21, 2015 at 4:26 pm | Permalink

      As I vaguely recall, in 1975 there was only one way of producing babies and just about adequate ways of avoiding them without destroying the pleasure of trying.
      I do not suppose there were many people then who envisaged the multi choice routes available today. Not even the EU was daft enough to ban that which was unimaginable. If they were, lets speculate on what they might like to ban now which might just be possible in 2075.

  25. Terry
    Posted February 21, 2015 at 3:05 pm | Permalink

    A surplus PSNB for the month of February is nothing new.
    Since 2006, with one exception in 2010, when there was a surprising £4B deficit (v a £2b surplus forecast), each February has yielded a healthy surplus.
    Another fact is that during the recovery years from March 2009 to Jan 2011 there were no surpluses thus displaying the means behind the “recovery”. Borrowed money. And it is a sad fact that over the past 120 months there have been just 19 occasions when the UK was in surplus. Each time there was a deficit our debt was increased. That’s £960 Billions extra PS current account debt since Jan 2006. Bail outs not included.

    At this rate there is absolutely NO chance that this country will ever pay off its debt. A debt that costs around £1 B each week at the current ultra low interest rates. When (not if) the Bond prices tumble our debt repayments will rocket. So much so that our currency will suffer and yields will have further to rise to attract lenders, for we do not generate enough surplus to pay down any of our debts so we have to borrow more on top of the existing loans. If a tight grip is not made after the election we shall surely become another Greece.

  26. JoeSoap
    Posted February 21, 2015 at 5:10 pm | Permalink

    Clearly you should be drafted in to help with the UKIP manifesto, as your party seems to follow the same old line as the other 2 old parties on these things, and ignore both you and the obvious.
    How many tax rises is it since 2010?
    The economy has only really picked up because of the strangulation it suffered previously under Brown, like a dying man being given oxygen again when his throat is released a little. It’s a long way from being given free rein.
    It’s as clear as rain that low taxes stimulate economic activity.

  27. David Price
    Posted February 22, 2015 at 6:14 am | Permalink

    Has there been an increase in revenue from taxes on dividends in the same period as the decline in CGT returns? My impression is that the pundits advised moving to higher dividend assets in the last couple of years given the rubbish savings rates and the pensions mess, perhaps many actually did this.

    I wonder when being prudent, saving and buy & hold will be classed as tax avoidance and be branded morally repugnant.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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