Business leaders today said George Osborne should have considered easing rules on capital gains tax rather than lowering the 50% top rate of personal income tax to boost private enterprise.
Business leaders today said George Osborne should have considered easing rules on capital gains tax rather than lowering the 50% top rate of personal income tax to boost private enterprise.
WPP chief executive Sir Martin Sorrell told the Evening Standard: “To my mind, if people are building businesses, capital gains tax is what you should have been focusing on.”
Sorrell, who described his view of the Budget as “neutral to positive”, said cutting the top rate of income tax from 50% to 45% “could have waited for a year or two”.
Simon de Young, partner at PricewaterhouseCoopers, said that a lower rate of income tax for those earning more than £150,000 meant there was now less reason to look for capital growth rather than just earning an income from investments. The “differential” will now be far smaller between CGT — the rate charged on the sale of an investment — and the rate which applies to dividends from the same investment. The Chancellor kept CGT at 28% but cut the tax investors pay on dividends from around 37% to just over 30% by shrinking the top rate of income tax.
De Young explained: “It means an investor will think, ‘I’m agnostic about whether I make money from dividends rather than from a capital gains perspective.’ When CGT is lower, it means you might hold out for longer-term growth.”
But de Young pointed out that Osborne had made the CGT regime more favourable to entrepreneurs by reducing the tax rate to 10% on the first £10 million of profits.
