The Institute of Directors (IoD) has warned the government that a rise in Capital Gains Tax (CGT) would affect Britain's entrepreneurial spirit.
The business group believes CGT could be targeted by the Treasury and increased in order to help put public finances back on a stable footing following the coronavirus pandemic.
Tej Parikh, Chief Economist at the IoD, said:
'But any reform would have to be done with extreme care to prevent a knock-on effect. Positive entrepreneurialism will be more important than ever in the months ahead.'
'All told, ramping up CGT will pour cold water over Britain's entrepreneurialism just when we need it most. It's not an answer to the costs of COVID-19, but rather paves the way for a stunted recovery.'
Additionally, increasing CGT 'would only add to the impression held by some that wealth creation is falling down the list of priorities', the IoD said. It has urged the government to consider the UK's international standing as a destination for business, arguing that the UK has 'long held a strong reputation as a place to start, run and grow a company'.
The Chancellor has announced that the Budget will be taking place on 3 March 2021 and it is likely that any changes made to CGT will be announced then. It is expected that the rate of CGT will be increased from its current level to be equivalent to income tax rates.
Whilst it is difficult to plan with certainty, individuals who are substantial shareholders in trading companies may want to consider implementing pre-Budget planning. Read more about this in Gerald Edelman's article here.
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