CGT tax hike could affect business owners in retirement

The Federation of Small Businesses has warned that the Chancellor's decision to abolish CGT taper relief will affect business people in their retirement, as well as during their day-to-day activities.

The new flat 18% capital gains tax rate will apply from 6th April 2008.

The FSB say than many business owners were relying on the proceeds of a future business sale to fund their retirement. Clearly, with the increase in CGT from 10% to 18%, these small business owners will see a lower return on their investment.

Interestingly, the FSB also suggests that the CGT hike will also affect business owners seeking to sell their businesses before 6th April 2008, as potential buyers may seek a discount on the sale - as the buyers themselves will have to pay a higher CGT rate in the future.

FSB Chairman, John Wright, said, “Many entrepreneurs now face a more uncertain retirement. Their contribution to the wealth of the nation – their hard work, their taxes, the jobs they offer people and the facilities they provided for their local communities are all being taken for granted."

“We are not talking about millionaires or fat cats, but entrepreneurs who have taken a big risk and deserve their modest rewards on the sale of their business. A secure retirement for entrepreneurs is now looking less likely thanks to the Government’s tinkering with capital gains tax taper relief."

“Following the removal of tax relief on share dividend in 1997 this move is yet another attack on people being able to make secure provision for their old age. The Chancellor should suspend this proposal until full consultation with business groups has been held to radically alter and improve upon this disastrous proposal.”

You can sign a petition against the abolition of taper relief via the No.10 Downing Street site here.

The Federation of Private Businesses (FPB) also has a petition, so if you're unhappy with the CGT changes, you could always sign both!