Capital Gains Tax (CGT) remained at 18% in the 2010/2011 budget presenting higher earners with an excellent tax saving opportunity as top rate of income tax rises to 50 percent on April the 6th.
Capital gains can be made when profits from investment properties, shares or other types of investments are realised. The fact that there is a £10,100 tax free allowance for capital gains makes a strategy based around these types of investments even more attractive.
At 18%, capital gains tax is considerably below the 50% income tax that many high earners will be charged. Many of these people will be tempted to save tax by maximising their capital gains, which will only be subject to 18% tax rather than being subject to a 50% levy.
Experts had predicted that CGT was set to rise to 30% in the budget, however it is highly likely that another budget will called shortly after the election, and capital gains tax could be revised upwards then.
In the meantime, the large disparity between CGT and the top rate of income tax is bound to be exploited by those high earners who are eager to minimise their tax bills.