Budget: Relief over capital gains tax as Osborne retreats

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Hear informed debate in a special edition of our BusinessTalk podcast, with experts from Deloitte in Leeds

The rate at which the tax is charged on non-business assets including property and shares rose from 18 per cent to 28 per cent from midnight last night for higher rate taxpayers.

However, the increase is far lower than speculation ahead of the Budget which predicted that capital gains tax (CGT) could rise to 40 per cent or even 50 per cent.

The annual CGT allowance will also remain unchanged at 10,100, despite rumours that it would be slashed.

There was even an increase in the lifetime allowance for gains made by entrepreneurs which are free of the tax, with this rising from 2m to 5m.

The rate at which entrepreneurs pay the tax will remain unchanged at 10 per cent, while basic rate taxpayers will continue to pay CGT at 18 per cent.

Adam Waller, a partner in private client services for Deloitte LLP in Leeds, admitted that the increases were not as bad as had been expected as CGT was seen as an "easy target" to bring in much-needed revenue.

But he added: "Interestingly, the Government stated that CGT rates will be more closely aligned with income tax rates and that the Chancellor will decide the rate of CGT for the 2011-12 Budget in 2011. This suggests that a further increase in rates is not out of the question."

The CBI's regional director for Yorkshire and the Humber, Andrew Palmer, said the move recognised "the need to support entrepreneurship".

He added: "It is good that the Chancellor has recognised that the rate at which capital gain is taxed needs to be internationally competitive and avoid penal rates that harm revenue."

Concerns had been voiced that major increases in capital gains tax could deter investors from putting money into the private rented sector.

The change is expected to boost revenues by 725m next year, rising to 925m in 2014-15.

But Mr Osborne said he had stopped short of raising the rate at which the tax is paid above 28 per cent, as research had suggested this would actually lead to a fall in revenues.

However, it is expected that some higher rate taxpayers will still exploit the system by simply transferring properties and other capital into their spouse's name.