Economic slowdown to hit CGT payments

28 October 2008

The economic downturn will have an adverse effect on the level of income the government can generate from capital gains tax (CGT), it has been predicted.

In the financial year 2006/07, the government raised some £5 billion in CGT.

However, the impact of both the credit crunch and the likely recession on the value of shares and on the buy-to-let and second property market will greatly reduce tax receipts.

The warning came from Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), who said: “ Capital gains receipts from shares will decrease because there is a fall in share prices. The market will again push down the level of capital gains tax which people pay to the taxman.

“Overall, even if the stock market begins to rally, ACCA suspects there will be sharp declines in the amount of CGT which goes to the Exchequer over at least the next year.”