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Capital gains tax changes could encourage business investment

12th May 2016

Changes to capital gains tax (CGT) and entrepreneurs' relief may boost business investment, according to research by the Institute of Directors (IoD).

From April 2016, the rate of CGT was reduced from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers – this excludes certain residential property and carried interest.

The IoD asked 1,224 members whether the cut in CGT and extended entrepreneurs’ relief for shareholders in unlisted companies would attract more investment for start-ups and fast-growing business.  

24% agreed that the changes would be significantly attractive for their business, while 55% said it would be slightly more attractive.

Only 1% said that the changes would be unattractive for their business.

Stephen Herring, head of taxation at the IoD, said:

“The Chancellor rightly reformed taxes on capital gains at the Budget to encourage investment in the entrepreneurial firms that will create the innovative products of the future, and new jobs with them.

“Now the good work has been done, at future Budgets the government should consider whether reliefs targeted at entrepreneurial companies could bring more bang for the taxpayers’ buck.”

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