BRIEFING PAPER Number 5572, 8 September 2020 Capital gains tax : recent By Antony Seely developments Inside: 1. The origins of the current tax structure 2. CGT and the new 50p rate of income tax 3. Debate on CGT reform after the 2010 Election 4. The Coalition Government’s reforms 5. The Conservative Government’s reforms 6. Annex: CGT statistics www.parliament.uk/commons-library | intranet.parliament.uk/commons-library |
[email protected] | @commonslibrary Number 5572, 8 September 2020 2 Contents Summary 3 1. The origins of the current tax structure 6 2. CGT and the new 50p rate of income tax 9 3. Debate on CGT reform after the 2010 Election 12 4. The Coalition Government’s reforms 18 4.1 The June 2010 Budget 18 4.2 Subsequent debate 27 5. The Conservative Government’s reforms 36 5.1 The Summer 2015 Budget 36 5.2 The 2016 Budget 39 5.3 Subsequent developments 41 5.4 Budget 2018 47 5.5 Budget 2020 54 6. Annex: CGT statistics 66 Cover page image copyright: No copyright required 3 Capital gains tax : recent developments Summary Capital gains tax (CGT) was first introduced in 1965 on capital gains made on the disposal of assets by individuals, personal representatives and trustees. It is charged on gains in excess of the annual exempt amount, set at £12,300 for 2020/21.1 The tax is forecast to raise £11.4 billion in 2020/21.2 Over the last thirty years, CGT has been substantially reformed three times, as successive governments have sought to meet a number of different concerns: that the tax be charged on real, rather than inflationary gains; that the tax should promote long-term investment and entrepreneurship; and that the tax should not act as an incentive for individuals to avoid income tax, by converting their earnings or profits into capital gains.