An increase in capital gains tax will be at the heart of a package of reforms agreed by the new coalition government led by prime minister David Cameron, according to Chris Marshall of Citywire.
He predicts that the CGT paid on ‘non business’ assets such as shares and second homes, currently a flat 18% rate, is likely to rise close to the 40% rate of income tax.
In return, the Tories have agreed to a Lib Dem proposal to raise the income tax exemption to £10,000, which is likely to take place in April 2011.
This will be paid for by not going ahead with the previously proposed Tory reversal of Labour plans to increase the employee element of the national insurance contributions; the reversal of the Labour plans to increase employer’s national insurance will go ahead.
Citywire's other emergency Budget predictions include the Tories having to scrap their plans to raise the threshold at which inheritance tax is paid to £1 million. Equally, the Lib Dems will drop their proposals for a ‘mansion tax’ on properties worth more than £2 million.
Tory plans for a £150 marriage tax break for middle and low income earners will go ahead.
The new chancellor George Osborne will hold an emergency budget within 50 days in which he will have to set out the plans to tackle Britain’s huge deficit.
(if you are considering realising capital gains ahead of the upcoming emergency Budget you might want to read my post Money tip #63 to # 66 – How to realise capital gains without paying tax)