Taxing Capital Gains Fairly

Capital Gains Tax (CGT) is a tax on the profit made when you sell an asset that has increased in value, such as shares, property, or valuable personal possessions. 

At present no CGT is paid on profits up to £3k. Basic rate tax payers are taxed at 18% and higher rate tax payers at just 24% on capital gains.

But taxes on income are at 20%, 40% and 45%. It is clearly wrong that the tax rate on someone who makes large profits on things they sell should be so much lower than the rate paid on ordinary earned income.

Liberal Democrats' proposed Capital Gains Tax (CGT) reforms feature a three-tier system of progressive taxation. The proposals would close loopholes and increase taxes on the wealthiest individuals. 

Key elements of the policy include:

• Tax Bands and Rates: Gains would be decoupled from income and taxed at three tiers: 20% for gains between £5,000 and £50,000, 40% for gains between £50,000 and £100,000, and 45% for gains over £100,000.
• Increased Tax-Free Allowance: The CGT tax-free annual allowance would be increased from £3,000 to £5,000.
• Business Relief: Targeted relief and protections for small businesses would also be included
• Inflation: To make the system fairer there would be an allowance for gains resulting from inflation.

This is a well-thought-out package of reforms that would raise billions of extra revenues for spending on essential services such as the NHS.