Vanishing Capital Gains Tax – revenue falls for 3 years thanks to high rate


The government is struggling to collect enough CGT. Maybe the 28% rate is a turn off. Maybe they should have listened to those of us who argued to keep labour’s lower rate of 18%, as the best way to maximise CGT revenue. The government should ask itself why is CGT the vanishing tax?

You would have thought CGT should be surging. After all the Stock Exchange is at a new high, and property prices especially in London have been booming. Instead CGT revenue has been falling – from £4.337 bn in 2011-12, to £3.927 bn in 2012-13 to £3.908 bn in 2013-14.

The Treasury and OBR forecasting models are clearly far too optimistic. Just look at the way they accelerated the forecasts for CGT revenue for 2013-14 as the economy started to recover more rapidly:

June 2010   estimated £3.3bn

March 2011   estimated £3.7bn

March 2012   estimated £4.9bn

March 2013   estimated £5.1bn

Current outturn  £3.9bn

In other words the CGT revenue actually received on latest figures (after the year end) is down £1.2bn or 30% of the achieved total compared to last year’s forecast. It is still under half the level reached in 2008-9 with a lower rate.  (£7.852bn)

The Treasury do now accept a Laffer effect on CGT. They agree that a higher rate than 28% could lead to lower revenues. It looks from the figures as if 28% yields less than 18%. It certainly shows their forecasting model is way off beam, as they think a stronger economy and higher asset prices leads to rapid growth in CGT, when it is still leading to a fall.

The reason the optimising rate for CGT is low is people can easily put off taking gains, or can find offsetting losses, when they think the rate is too high.


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  1. Lifelogic
    Posted June 28, 2014 at 5:19 am | Permalink

    18% but with the ability to index the gain against inflation is about right. 28% with no inflation indexation can mean you are paying large taxes on what is already a large real loss.

    The stupidity, high rates and, almost more so, the complexity of the tax system it is totally absurd. One often ends up with hugely complex structures and many companies to make you tax efficient. For example companies use insurance product to pay IPT rather than VAT, go through convoluted transaction to reduce IHT and cannot tidy up convoluted company structures for tax barriers.

    Do they want people to run and improve their businesses or read endless tax books and spend a fortune on tax advice and largely parasitic pointless activity?

    • Bob
      Posted June 28, 2014 at 9:23 am | Permalink

      “Do they want people to run and improve their businesses or read endless tax books and spend a fortune on tax advice and largely parasitic pointless activity?”

      Lifelogic hit’s the nail on the head again.

      • formula57
        Posted June 29, 2014 at 9:23 am | Permalink

        The better target than CGT is Inheritance Tax.

        It is known as the avoidable tax (via the otherwise “pointless activity” of setting up discretionary trusts etc.). Yet only the truly rich have the flexibility to take extensive avoidance measures: the middle classes do not and so get disproportionately clobbered.

        (I do confess that one of the delights of my anticipated lottery jackpot win is then thereafter paying no tax 🙂 )

        • Livelogic
          Posted June 29, 2014 at 7:22 pm | Permalink

          It is certainly easier to avoid tax when you have capital and income from capital, rather than from working. This as capital can move more easily so the government has to be more careful not to push it away. Workers are less mobile and can this be more easily be partially enslaved by government to fund their endless waste.

          But who would buy lottery tickets? Save the money and time spent buying and checking and use it to earn some more money instead.

    • Colin
      Posted June 28, 2014 at 10:23 am | Permalink

      Taxing capital to pay for current expenditure is madness. The only rate that’s “about right” is zero.

    • Anonymous
      Posted June 28, 2014 at 12:44 pm | Permalink

      VAT itself must be subject to the Laffer effect – cash-in-hand being widespread these days. Try to control people too much and they become deceitful.

      • Mark
        Posted June 29, 2014 at 12:49 pm | Permalink

        Indeed it is. However, the evidence is that the present rate is not above the revenue maximising rate. VAT receipts fell sharply when the rate was temporarily lowered – they were just £68.6bn in 2009 when VAT was 15%, and rose to by 17.9% to £80.9bn in 2010 when it was 17.5% (a 16.67% increase in the rate). In 2011, when the rate was raised again to 20% (a 14.3% increase in the rate), revenue rose by 17.7% to £95.2bn, £98.6bn in 2012 and £103.8bn in 2013.

        Raising the rate above the generally prevailing rates on the Continent might produce a rather more abrupt change in revenues, as happened with some of the sharp hikes in tobacco duties that encouraged purchase and import from elsewhere in the EU (bolstering foreign tax revenue at the expense of the UK) and also extensive smuggling.

        • Mark
          Posted June 29, 2014 at 1:00 pm | Permalink

          I should mention Missing Trader in Chain VAT fraud – by far the biggest tax evasion (which actually works by securing a tax repayment), the cost of which is so severe it has its own official estimate in the Budget Red Book.

      • Livelogic
        Posted June 29, 2014 at 7:23 pm | Permalink

        Or they just keep turnover below the VAT threshold and do not take any trainees on.

    • Lifelogic
      Posted June 29, 2014 at 5:58 am | Permalink

      When JR talks of the optimising rate he means the optimising of tax revenue from that particular tax. This is, of course, a far higher % rate than would benefit the economy to the optimum.

      It is after all fairly clear that leaving £1000 with the person who made it (and is probably rather good with investing money) so they can use it to make more, is a good plan. Surely far better than giving it to the coalition to piss down the drain on greencrap subsidies, HS2/3, pointless wars, the climate change act, daft employment laws, PIGIS loans or other madcap schemes they push.

      • Bazman
        Posted June 29, 2014 at 10:56 am | Permalink

        Daft employment laws? There you go again. Which are daft in the massively oversupplied labour market. The ones that say hire and fire at will with no contract, any health and safety regulations and the minimum wage laws?
        Abolishing these will not help the economy. It will not and would be massively expensive to the state as we are seeing at the moment with the amount of benefits paid out to the working poor who cannot afford private healthcare/ education, rent, and any other thing you presume someone on 12k a year can afford such as long distance commuting and paying for their own training.
        When a state becomes richer the lowest in society are helped by higher levels of income by pay or if employment fails to provide this by benefits. Anyone care to argue against this? The same tired slogans from you without giving the slightest indication of self doubt. More know-nothing, learn nothing stupidity from you.

        • Edward2
          Posted June 30, 2014 at 6:29 am | Permalink

          Until you have struggled with all the red tape, paperwork and complex legislation surrounding employing just one person, you will never know just what a time consuming part of running a small business ” daft employment laws” are.
          They come pouring out of the EU and our own Government every year adding to the time spent on compliance.
          The aim of all this is to make politicians more popular with their voters, but they sadly have the reverse effect.
          They reduce your chances of finding a job as employers either just pack up or find clever ways of operating their companies without those extra people.

          • Bazman
            Posted July 1, 2014 at 6:01 am | Permalink

            Which daft employment laws specifically are causing this? Self employment, short term contracts, zero hours contracts agencies. The list goes on. Presumably you mean any laws that prevent hire and fire at will and give some rights to the employee to work in a safe environment without intimidation or threats?

          • Edward2
            Posted July 1, 2014 at 3:30 pm | Permalink

            Read more carefully what I say and stop making incorrect presumptions.
            Just have a look and see what your responsibilities are if you were to start a business and take on just one person to help you.
            Its a long list and every year it gets longer.
            Easy for big companies and the public sector who can have whole departments to do the admin but for SMEs it is both a costly time consuming burden and a disincentive to take on extra staff

    • Dan H.
      Posted June 30, 2014 at 4:54 pm | Permalink

      The other thing is that the Treasury clearly cannot accurately predict tax outcomes. Frankly, their prediction model is utter rubbish based on this.

      I wonder, which of their other assumptions are similarly rubbish?

  2. Mike Stallard
    Posted June 28, 2014 at 5:47 am | Permalink

    Does this only apply to CGT or do other taxes fall when the rates remain high?

    • Lifelogic
      Posted June 28, 2014 at 9:42 am | Permalink

      Yes revenues all fall when the rates get too high. This as people give up, find avoidance mechanisms, leave the country or just sign on the dole. Not only this but when you take money off them in over high income tax say they have less to spend or invest for the future so the government loses out on other taxes such as VAT, stamp duty, inheritance tax, national insurance, fuel duty ……

      The latest government figures show that only the households in the top 48% of earnings contribute more to HMRC than they cost. So the uncontrolled immigration from the EU is clearly lowering GDP per head, as most are very clearly in the lower 52%.

  3. Richard1
    Posted June 28, 2014 at 6:01 am | Permalink

    This is one of the clearest examples of the Laffer curve effect. The continued denial of leftists is absurd.

    Likewise the UK having the strongest growth outlook in Europe has made fools of all those leftists and de haut en bas Keynesian economists who were so certain the policy of getting the deficit down would lead to stagnation not recovery.

    Any more reasons needed to make sure we don’t have another Labour govt?

    • Lifelogic
      Posted June 28, 2014 at 10:07 am | Permalink

      Indeed but we have the “BBC think”, Libdum, Lefty types pushing their magic money tree economics and the politics of envy at us almost every day it is state sector propaganda to justify the bloated state sector that produces so little of value. We should not even be seeking to maximise tax revenues, we should just be spending circa 20% of GDP in areas only where the government can spend it better than people mainly law and order and defence. We would then have a much larger GDP anyway.

      Stop all the green expensive energy subsidies, HS2/3, the pointless wars, CAP, payments to the feckless and get out of the EU for a start.

    • Bazman
      Posted June 28, 2014 at 12:03 pm | Permalink

      You have had the Lafer curve effect pointed out to you before and still insist that it purely means lower taxes means more are paid. It does not. Why do you continue to believe this. Are you deluded? What you also forget is that some individuals and companies refuse to pay any tax and more importantly believe they should not.

      • Richard1
        Posted June 29, 2014 at 7:23 am | Permalink

        It seems from your posts you do not understand the concept of the ladder curve. It means there is a revenue maximizing rate of taxes. If we see receipts fall when rates are raised as in the example above, it means the rates are set at too high a level, and receipts would be likely to rise if rates were reduced. Complicated isn’t it.

        • Bazman
          Posted June 29, 2014 at 10:02 am | Permalink

          Maybe you should take a look at previous posts you and I wrote on this subject.

          Have you anything new to add? Thought not

        • Bazman
          Posted June 29, 2014 at 3:24 pm | Permalink

          Ladder curve?

        • Livelogic
          Posted June 29, 2014 at 7:28 pm | Permalink

          No not complicated at all just blindingly obvious. How many people would get out of bed to work if tax is 110% of earnings, how would they eat of get to work?

          • Bazman
            Posted June 30, 2014 at 6:17 am | Permalink

            Maybe this is why so many minimum wage jobs go unfilled by your ‘logic’ in this case? Not that there should be a minimum wage that is.

    • Lifelogic
      Posted June 28, 2014 at 3:02 pm | Permalink

      Leftist are nearly always absurd, the triumph of envy and emotion over and above logic, an understanding of human nature, science, maths and reason.

      • Bazman
        Posted June 29, 2014 at 9:40 am | Permalink

        You are an easy target lifelogic, but spreading black propaganda with little factual basis makes you a legitimate one.
        Maybe you should look at modern conservatism and why the right embraces ignorance as a virtue. Boris Johnson close to home and many on the right in America who believe that science is just silly and they alone own the facts. The thing is, shameless lying and ignorance works surprisingly well as a debate tactic. It’s hard to argue with someone who not only has signalled that he doesn’t care what the truth is but is downright proud of how little he actually knows. Such a person is not amenable to being educated. Once the pretence of really caring one way or another about what is right and what is wrong has been abandoned, all avenue of discourse is shut down. Right wing middle aged men are very prone to this such as yourself.
        Your pseudo scientific beliefs are neatly framed in your insistence that a push bike is powered by fine wines, caviare and the best steaks causing the rider to have to eat more of these foods causing more carbon emissions and obesity. LOL!
        Or failing to answer the problem of low wages. The employer making large profits paying more or the state subsidising the employee and the employer. Or the employee living in poverty? Which is it? A rant on tax is not the argument. Zero hours contracts and a short term rental contracts you will tell us helps the employee by creating more work. As if.
        Get your own deluded middle aged mans fact sorted out first.

        • Edward2
          Posted June 29, 2014 at 11:12 am | Permalink

          But in sense you are exactly the same as you accuse others Baz.
          You meekly accept all the current high priests of science tell you.
          They have been wrong in the past many times as sudden new research reveals new ideas.
          There can and should be debate and argument on most scientific economic and political debates.
          You and the general left wing of politics do not hold a monopoly on the truth no matter how much you shout and heckle those you disgree with.
          It comes with freedom of speech with the left dislike.

          • Bazman
            Posted June 30, 2014 at 6:24 am | Permalink

            Climate change scientists deal in science and many where sceptical and hoped they where wrong however the sciences point to this. You and the deniers however just harrumph science and try to make your deluded ideas scientific such as push bike are in general powered by expensive foods and not cheap sugar and fats. This is the difference. You seem to want things to be factual and scientific, but if you do not like the results of this research refuse to believe and go into denial. Applies to many other things it seem in deluded conservative minds of all political beliefs. In effect they are thick and see ignorance as a virtue.

          • Edward2
            Posted June 30, 2014 at 10:39 am | Permalink

            Well here is a fact for you Baz.
            Still less than one degree of global temperature increase since 1900.
            I dont consider that to be catastrophic and I think humans will adapt to that rise and manage to survive.

        • Hope
          Posted June 29, 2014 at 11:50 am | Permalink

          I prefer Lifelogic’s explanation to yours.

        • Kenneth R Moore
          Posted June 29, 2014 at 12:20 pm | Permalink

          Sounds like someone has been reading the rather entertaining nonsense of Michael Moore
          It’s interesting to figure out which ‘logical fallacy’ a particular lefty will use. I detect the use of the ‘strawman’ fallacy here with asprinkling of ad-hominem attack…maybe a little tu quoque….

        • Livelogic
          Posted June 29, 2014 at 7:36 pm | Permalink

          But like it or not a push bike clearly is powered “by fine wines, caviare and the best steaks” if that is indeed what the rider chooses to eat (Boris perhaps).

          Should you find any real scientist who disagrees please do let me know – they should get a Nobel prise if they can show they are right!

          • Bazman
            Posted June 29, 2014 at 8:42 pm | Permalink

            Push bikes are powered by cheap sugars and fat. You do not have to be a scientist. Only a surgeon. LOL!

  4. Lindsay McDougall
    Posted June 28, 2014 at 6:07 am | Permalink

    The OBR was carved out of the Civil Service and suffers from an inability to appreciate how flexible and adaptable the human race is. CGT is not the most important issue where this inability is apparent.

    The OBR predicts that if the UK ensured zero net immigration our fiscal deficit would soar. They fail to take into account acceleration of the requirement to work until a later age, economies in the medical and social care of geriatrics, the benefits of bearing down on house prices, more efficient use of and better training for indigenous labour, and a lower unemployment rate.

    Germany’s population is back down to its 1995 level. Germany has had economic growth in the intervening years. In what way are we inferior to Germany? In what way are we less adaptable? Japan has coped with a declining population without suffering too much. Has Japan got a magic bullet?

    • Jerry
      Posted June 28, 2014 at 8:53 am | Permalink

      @Lindsay McDougall: “Has Japan got a magic bullet?”

      Deflation and stagnation?… 😮

  5. Leslie Singleton
    Posted June 28, 2014 at 6:14 am | Permalink

    Agree of course except that not so sure that “you would have thought CGT would be surging” meaning that perhaps as things got better people will have been less likely to have been forced to sell. Nobody happily incurs CGT voluntarily any more if they ever did–it used to be complicated but fair but not any more.

  6. zorro
    Posted June 28, 2014 at 6:26 am | Permalink

    Absolutely John, but I fear that your last sentence will sum up how they choose to ‘deal with this problem’….. ‘The reason the optimising rate for CGT is low is people can easily put off taking gains, or can find offsetting losses, when they think the rate is too high’.

    I suspect that they will say that they should keep the tax rate for ‘political’ reasons and try and choke off ways of putting off gains and offsetting losses which will, of course, involve more regulations, tax policeman prying forensically ever more into your accounts. This will, of course, cost more money and choke off activity.


    • Lifelogic
      Posted June 28, 2014 at 9:45 am | Permalink

      Indeed running a business not can easily end up being 90%+ just a government slave dealing with VAT. PAYE, Employment Laws, Health and Safety, taxation ……..

      • Leslie Singleton
        Posted June 29, 2014 at 12:10 am | Permalink

        ………..and (Lifelogic) now forced contributions to pensions, which all might not be SO bad except that employers astonishingly have to pay the Government not the other way round for doing all they do, not yo mention the left wing loonies always saying that employers should pay staff more (just like that) all such that many potential employers would rather die than hire people. Many (I know four personally) would rather potter along on their own rather than expand and hire even one single person (which needless to say doesn’t do a lot for the overall tax take).

        • Livelogic
          Posted June 29, 2014 at 7:39 pm | Permalink

          Exactly. “Vince Cable/BBC think” and over regulation is hugely anti -business, anti-growth and anti-jobs.

      • Bazman
        Posted June 29, 2014 at 9:45 am | Permalink

        But no for some in particular large companies who enjoy communism for the rich via massive corporate welfare, special deals cut only for them and the middle class social security system.
        Interesting to see who challenges the fracking low staling the gas from landowners. Obviously will not apply to large landowners and those rich enough to scam the system by claiming a company owns the land or some other scheme not available to the average householder. See you in court.

        • Edward2
          Posted June 29, 2014 at 8:25 pm | Permalink

          Its these very large companies Baz, who are the ones who are really enthusiastic about the EU and want it to turn into the Eunited States of Europe.
          Which why I am amazed that socialists like you are equally enthusistic.

  7. oldtimer
    Posted June 28, 2014 at 6:30 am | Permalink

    The only surprise is that is taking so long to recognise, let alone act upon, that the 28% is 10% points too high. It is a politically inspired rate not a rationally inspired rate. It is the sort of measure that brings ridicule to thase politicians responsible for its introduction.

  8. A.Sedgwick
    Posted June 28, 2014 at 6:33 am | Permalink

    There could be a strong case for abolishing it. The released disposal and investment income could recoup the lost revenue by increased economic activity and higher take on other taxes.

    • Bazman
      Posted June 28, 2014 at 12:06 pm | Permalink

      Lower taxes are not self funding despite your religious belief they are. Massive tax cuts have been given to the rich over the last 30 years in the west for little if any gain.

      • Edward2
        Posted June 28, 2014 at 10:56 pm | Permalink

        Wrong again Baz
        Rich now pay more tax than ever before.

        • Bazman
          Posted June 29, 2014 at 10:07 am | Permalink

          They now have more money they have ever had before to pay any tax rises and to say they pay more than ever before is deluded. Bush gave trillions to the rich leading to the massive deficit they have. You seem to believe tax cuts are self funding They are not.

          • Edward2
            Posted June 30, 2014 at 6:39 am | Permalink

            You need to look at tax figures for the UK and realise how revenues have risen from the higher paid and those on even higher income levels.
            The facts are there.
            You would bring in much higher percentage rates even hought would produce less revenue, which is buzarre.
            Using a dodgy correlation between President Bush and the USA’s current deficit is a red herring.

        • Bazman
          Posted June 30, 2014 at 6:06 pm | Permalink

          The rich have seen massive rises in income in the last few years and the recent sales of of floating gin palaces are back in fashion, with a surge in orders from the have-yachts show this.
          British deals for five ships of shame were signed in as many weeks at a combined cost of £32million.
          For the have-nots the cost of making ends meet – food, electricity bills, etc – has soared 28% since the 2008 world financial crash, while earnings are up a pathetic 9%. The collapse in family living standards itemised by the Joseph Rowntree Foundation isn’t just a reason why the ConDems deserve to lose but why they are likely to lose.
          Deluded apologist nonsense from an internet fearing fool.

          • Edward2
            Posted July 1, 2014 at 3:37 pm | Permalink

            No need to be so rude and angry all the time nor so envious. Its not good for your health and well being.
            There are more rich and the figures show greater inequality and that is true and because of Labours great recession standadrs of living have fallen.
            Most of the new rich are Chinese and Russian not British ones.
            Your solution it seems is to attack thees rich, steal their money and give the poor the spoils.
            They woukd end up with a few pounds each and then what?
            I dont understand your final ranting insult as I do not fear the internet.

  9. Denis Cooper
    Posted June 28, 2014 at 7:58 am | Permalink

    CGT is a time-consuming pain and it can be very unfair for passive small investors, and it would be better if as many of them as possible could be kept well out of it; one way to do that would be to allow unused annual allowances to be rolled forward to future years indefinitely, with some kind of inflation indexing each year.

  10. acorn
    Posted June 28, 2014 at 7:59 am | Permalink

    Since when was it the job of an elected politician to maximise the extraction of tax from the people who elected them.

    Taxes function to control aggregate demand in the economy. They allow the “sovereign” that creates the monetary system, to move resources to the public sector for the public purpose.

    Where are we on your Laffer Curve with Tobacco tax for instance. There is a strong chance if you reduced it, the revenue from the tax would go up; the little people who once enjoyed smoking, could afford to buy cigarettes again.

    The majority of Taxes imposed in western economies are to stop people doing things, NOT to raise revenue. A successful “sin” tax is one that raises no revenue whatsoever. So get your Laffer gear onto the Bank Levy: Carbon Tax; Climate Change Levy; Spirit Duty; Fuel Duties etc. Or, dare I say it; Inheritance Tax.

    • APL
      Posted June 29, 2014 at 5:59 pm | Permalink

      acorn: “Since when was it the job of an elected politician to maximise the extraction of tax from the people who elected them.”

      Since the elected politician identifies more with his party than his constituents.

  11. Mark B
    Posted June 28, 2014 at 10:13 am | Permalink

    Many business, particularly large corporate ones, can arrange to have their concerns headquartered in another EU/EEA member state, with a more favorable tax regime. It is because of this, that I believe lay at the heart of the problem. Also, many EU citizens can now set up small companies and arrange matters in their home countries which, may also have a more suitable tax regime.

    Under such circumstances, when both membership of the EU/EEA and the allowance of both free movement of labour and money to other member states, the UK Government will, by its own hand, reduce the amounts that it can receive in taxes.

    It also does not help when, you have a State that is too big and a Government that will not seek to reduce the burden that the State imposes upon the productive part of the economy. Coupled with the fact that, many more people and business, are competing and driving down the cost of wages and profits, both of which the State needs to be at a certain level in order to tax sufficiently.

    It comes down basically to tax and spend, and the inability of those who have never either had a proper job, or run a business, and therefore cannot relate the significance of ’cause and effect’ when it comes to Government policy on said taxes and spending.

  12. zorro
    Posted June 28, 2014 at 10:16 am | Permalink

    How about abolishing CGT for the sake of 4bn a year revenue and cutting some expenditure, or QE that amount to cover expenditure? They might even find that they don’t need to do that after a year with resultant increase in business activity and flow of money/economic growth…..


  13. Bert Young
    Posted June 28, 2014 at 10:33 am | Permalink

    If only we could deal with the EU as we can with CGT . “Avoidance” has always been a legitimate way of approaching one’s tax returns – of course , “evasion” is a different matter . A hard-headed response when confronted with officialdom is one way of maintaining individuality ; it’s not always right , but , it is always effective . Faced with ever-increasing pay-outs , there is no option but to dig one’s heels in and say “enoughs enough”; opting for the avoidance approach is fair game in a war when the odds are stacked up against you . Nelson adopted his “didn’t see” approach in one of his famous sea victories and many successful businesses and business men I have known have done the same thing . It’s results that count in the end – if you don’t get what you set out to do , think again and , if necessary , get the rules changed or avoid them .

  14. JoeSoap
    Posted June 28, 2014 at 11:17 am | Permalink

    Cameron/Milliband’s answer will probably be to suggested an imputed Capital Gains Tax, taxing assets which were purchased previously at a lower price as though those assets were to be sold today. More jobs for more scutineers. You could also of course do away with the CGT annual allowance. Either of these would make the reality match the aspiration.

  15. FonyBlair
    Posted June 28, 2014 at 11:56 am | Permalink

    Left wingers just don’t understand what high tax rates do to consumer behaviour

    I’ve got a load of shares from an SAYE scheme some of which I’m transferring into an ISA to then sell immediately CGT free. Others I will hold as they’ll have to fall 28% by April next year for me to be worse off (possible but I’ll take the risk!) .

    I can then just sell them with the CGT allowance so the Govt get NOTHING. If the tax was lower I would just sell everything now and take the cash but the Government forces people to jump through loads of hoops to avoid envy taxes!

  16. Andyvan
    Posted June 28, 2014 at 1:58 pm | Permalink

    Yes us tax cattle can only take being milked so much before expiring. We have to be optimised so we produce the maximum amount for the ruling class to steal. Heaven knows what we’d do if we were allowed to keep our own money.

  17. dumpling
    Posted June 28, 2014 at 2:21 pm | Permalink

    I do not know any civil servants working in the Treasury but I do know one who works in the Department of Work and Pensions. On one occasion, a minister (no name mentioned) did not like the figures produced so they were asked to go back and produce figures the minister did like – shades of the second dodgy Iraq dossier?

    Could it be that Treasury officials are sometimes under similar pressure?

  18. Chris s
    Posted June 28, 2014 at 2:57 pm | Permalink

    We have had this discussion here at least twice before and your assessment is absolutely correct.

    The huge hike in CGT tax liabilities as a result of the removal of taper relief has made a complete mess of my own retirement strategy. I have properties bought and rented out for the last 12-15 years on which I have BTL mortgages and over the next 8 years these are approaching their end dates.

    I had planned to sell off half leaving me with cash to help my children and pay off the mortgages leaving the remaining half mortgage free and providing retirement income.

    Now, faced with a huge CGT bill on each sale I have been forced to hang on to all of them.
    I would prefer a lower rate but with generous taper relief as this would encourage investment for the long term rather than short termism.

    Either way, a reduction in the CGT tax take is absolutely essential to break the log jam, release property and other assets for sale. This will without doubt increase the overall tax take.

    Trouble is Labour and the LibDems both have an unpleasant obsession with the politics of greed and envy. They just want to punish the prudent investor with punitive tax rates.

    They care not one jot that there is overwhelming evidence that this raises less revenue.

    • Mark
      Posted June 29, 2014 at 12:22 pm | Permalink

      I have long argued that we need a deal to unlock BTL portfolios, and that CGT acts as a ratchet on ever increasing BTL tenure at the expense of owner occupation. It has consumed 220,000 homes a year out of the stock that otherwise would have been available to owner-occupiers. Wise BTL investors who got in early at sensible prices and rent yields are especially penalised by CGT, unable to rebalance their portfolios. Generation Rent are also penalised through the consequences of the portfolio ratchet on house prices and availability.

  19. formula57
    Posted June 28, 2014 at 3:53 pm | Permalink

    Keep in mind that whilst true that ” people can easily put off taking gains” it is only delay they can engineer, not avoidance. Accordingly, holding the rate will see the expected revenues (possibly via IHT) so there is no need for any U turns, just firm resolve, for the Exchequer to benefit – as benefit it must in these fiscally challenged times.

    • Edward2
      Posted June 29, 2014 at 10:05 am | Permalink

      Not so. There are many ways to avoid paying cgt or other taxation grabs in the future that may apply as a result.
      Using family trusts, going offshore, using gifting allowances, using incorporation methods and using your annual allowances each year are just a few of many legal methods.
      Inheritance tax planning can be very effective and couples have tax free levels of over half a million before further planning is needed.
      The point is your method of the Treasury holding firm to rates which are too high is plainly failing and resulting in lower levels of revenue.

    • David Cockburn
      Posted June 29, 2014 at 5:39 pm | Permalink

      Formula57. I are wrong. I have shares I bought 28 years ago. Much of their value is now potential capital gain, not only because of growth of the company but because of decline in the value of money. Each year I sell about £10,000 worth so that I take the gain without paying CGT.
      If CGT was more sensibly arranged I would sell my shares and move the money to a better investment. As it is the money is tied up and so used relatively unproductively.

    • formula57
      Posted June 29, 2014 at 9:53 pm | Permalink

      I acknowledge your points that CGT is avoidable to an extent, not least through use of allowances designed for that purpose – in which case there may be less of a problem with the rate. That of course does not dispose of the problem that assets are “used relatively unproductively” but it is hard to assess the extent of that or whether it is something worth the government trying to address.

      (Placing assets in a trust or taking them offshore would typically be a taxable event for CGT purposes, would it not?)

  20. Kenneth R Moore
    Posted June 29, 2014 at 11:48 am | Permalink

    28% CGT….it doesn’t matter that at this level the treasury loses money….it’s just there to show that ‘we are all in this together’, and that David Cameron isn’t just a privileged rich man that looks after his own kind. The Tories aren’t the ‘nasty’ party anymore blah blah blah. The worrying thing is that the number 10 machine really thinks the public are moronic enough to fall for this little charade. People here have been complaining about the gulf between Cameron’s words and reality – this is just another example of his cosy new labour style of government.

  21. John Wrexham
    Posted July 3, 2014 at 11:49 pm | Permalink

    The reason for falling CGT yields are the same reasons why the self-employed pay pound for pound less income tax than employees on PAYE. If you are bright enough to run a business, you are bright enough to run rings around HMRC. Who wants to pay more money than necessary to this government – odds on it will hand the money to two groups of people a) those who don’t deserve it because they don’t contribute to society and b) the uber rich.

  22. Darren
    Posted August 12, 2014 at 3:48 am | Permalink

    Has the reduction is capital gains tax not correspond with the rise in stamp duty?

    Stamp duty is deducted in the calculation of expenses for capital gains, therefore reducing the amount that can be taxed, and reducing the capital gains earnings.

  • 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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