Capital gains tax and inflation

[King Cnvt]

Most countries factor into CGT indexing based on inflation.

Imagine you buy an asset and hold it for many years.

It doubles in value, purely due to inflation, so in effect in real terms it is worth no more than what you paid for it. You've made nothing in real terms.

Now you sell it and have to pay CGT on the "profit".

Effectively you have lost money for holding an asset.

Most civilised countries, index out of the gain the inflation before applying the CGT.

But not Britain. Oh, no.

[AtW]

This Govt does not want people to save and invest for long. This is because Govt makes more money from transactions (you buy stuff and pay VAT) than from long term investment and savings that actually allow this investment to happen. This will end in tears.

[beaker]

And people wonder why everyone is throwing so much money at their own house...

Still, I would argue that CGT is more of a tax on speculation than investment - if the asset generates enough cash there should really be no reason to sell it. You can always invest your money somewhere without CGT (eg NZ) but good luck getting it back

[AtW]

I think previous discounts that depended how long you keep investment were very good thing - apparently Gordon Brown made them but now took it back. The best investment is long term and to encourage this you need taxation to give discounts. Maybe 2 years for maximum taper relief for business assets was too little, they could have made it 3-4 or even 5 years, but to remove it completely and encourage speculation - buy shares today and sell tomorrow is frankly a very bad thing.