Call to protect long-term investors from CGT rise

Figures including the Conservative MP John Redwood want the Treasury to limit the impact on long-term savers by reintroducing taper relief, scrapped in 2008 when the Labour government introduced the flat CGT rate of 18 per cent.

Gary Shaughnessy, UK managing director at Fidelity International, said long-term investors should benefit from a lower rate of CGT, while investments held for less than a year should be taxed at the investor's marginal rate of tax, meaning the highest earners would pay up to 50 per cent.

He added that CGT increases should take inflation into account, so investors are not taxed on rises in value that are due to inflation. According to Fidelity, someone who invested 10,000 in the FTSE All Share in 1988 would currently face a tax bill of 9,910, based on the value of their shares having increased to 75,155. But the tax liability would soar to 22,022 if CGT rose 40 per cent without any indexation.

Shaughnessy said: "We believe the fairest change would be to target CGT increases at short-term investors, but if the government does increase CGT across the board, taxable gains should be reduced by the amount due to inflation or by taper relief. This avoids investors being unfairly penalised by being taxed on increases in value solely due to inflation."

CGT EXEMPTIONS

Assets with a value of 10,100 or less at the time of sale (pending possible reduction to allowance)

Government bonds (gilts)

Premium bonds

Stocks and shares in individual savings accounts (Isas)

Betting, lottery or pools winnings

Personal possessions up to 6,000

Private cars

Certain investment products such as enterprise investment schemes, venture capital trusts and investment bonds.

Collectibles including clocks, guns, carpets and classic cars

Personal injury compensation