Chancellor targets business investment with CGT decrease

The headline rate of capital gains tax (CGT) will be cut from 28 per cent to 20 per cent, and from 18 per cent to 10 per cent for basic rate taxpayers.

The new rates will come into effect in April 2016 but have not been extended to gains made on residential property and carried interest - current rates will continue to apply to both of these.

George Osborne told the Commons the tax reduction will give the UK a competitive edge on tax.

'We want people to invest in our businesses, and help them create jobs. The best way to encourage that is to let them keep more of the rewards when that investment is successful.

'Our capital gains tax is now one of the highest in the developed world, when we want our taxes to be among the lowest.'

The tax reduction will undoubtedly be well received by investors as they'll be able to keep more of the proceeds from any successful investments

However it is a further wound for property investors who have been repeatedly squeezed by George Osborne since he became chancellor.

'Today's dramatic reduction in capital gains tax is a bit of a 'bolt from the blue', but one that no doubt will be welcomed by many, said James Ward, partner and head of private client at Seddons.

'Notably absent, however, was any relief for second home owners. It would seem that the 8 per cent reduction will not be applicable to residential property where principal private residence relief does not apply, making the benefit only apply to gains on other assets such as investments.

'Once again, the chancellor has demonstrated his quite clear disdain for people making money out of the property market.'