The UK has been holding Budget meetings this week to discuss the national deficit and other fiscal matters. Chancellor of the Exchequer Mr George Osborne announced government plans to abolish Class 2 National Insurance Contributions from 2018.
The new incentive will allow for tax cuts for the 3 million self-employed individuals in the UK, allowing up to £130 in savings each week. It was also announced that the basic rate of Capital Gains Tax (CGT) will be reduced from 28% to 20% and any CGT paid by individual taxpayers from 18% to 10%.
As well, a brand new 10% rate for all external long term investment in local companies will be introduced, up to a separate maximum of £10 million on lifetime gains.
George Osborne released a statement about the cuts: ‘Our CGT is one of the highest globally, when in actuality we would like our taxes to be amongst the lowest. The new rates will come into effect in just under one months’ time.”
Not all investors or businesses qualify to gain from the lower entrepreneurs’ relief rate, so the reduction in CGT rates for taxpayers will encourage investment in companies in the UK and will be a welcome change for some.
Base rate taxpayers will also benefit where their investment meets the new criteria. This reduction of 8% is guaranteed to be of benefit to those who have large share portfolios and may be suffering from April this year by the increase of dividend tax. The change is likely to bring about taxpayers reviewing their current portfolios and making changes for the new system to meet their needs.