Just 247,000 people paid CGT in 2007-8 but that number would soar into the millions if the tax-free allowance was reduced in the Budget this month, the investment firm claimed.
The UK government is widely expected to increase CGT in its 22 June Budget from the current 18 per cent flat rate to re-align it with income tax at 20, 40 and 50 per cent. The threshold above which annual gains are taxable is currently 10,100, but there is speculation it may be reduced to as little as 2,000 in line with Lib Dem election proposals.
Fidelity warned such a move would hit older people who had saved to supplement their pension and were looking to sell holdings to generate income.
Paul Kennedy, head of tax planning at Fidelity, said: "The CGT allowance must be maintained at a level where it neither produces disproportionate burden on the modest investor nor distorts or compromises sensible investment plans."
The UK government is also considering changes to plans for automatic enrolment into workplace pensions from 2012. As it stands, employers will be obliged to auto-enrol staff into a pension scheme or, where the company does not offer one, into a new national scheme.
But pensions minister Steve Webb said that while the UK government was committed to auto-enrolment, it could reduce the scope of the scheme.
Pensions experts believe the UK government will review whether some low earners and some small businesses, perhaps with five employees or less, should be excluded from automatic enrolment.
John Lawson, head of pensions policy at Standard Life, said: "The government may decide to enrol only those employees earning above a certain amount and businesses with a certain number of people."
The earnings level below which workers are excluded from auto-enrolment is 5,035, but Lawson believes this could be raised as high as 15,000.