Why have a capital gains tax allowance

Not my Constable story, daphnedill I only posted about savings.

The £X that was originally used to buy the Constable would have had tax paid on it when it was income, and the Constable had probably increased steadily in value from when it was bought until it was "discovered" and sold, at the same rate as inflation has changed the value of the "pound in your pocket".

If a painting that cost a lot when bought falls out of fashion and actually loses value when it is sold, can the seller claim a Capital Loss and get a negative tax bill?

Ah, sorry, Elegran. I was too lazy to scroll back. However, I stand by what I wrote.

Some of the biggest beneficiaries of converting income to assets are buy-to-let landlords. What they do is use rental income to buy more mortgaged property. When they do their tax return, they claim that all income is used to pay back debt and, therefore, they make no profit. The ONLY tax they pay is CGT. They haven't paid any other tax and there are even ways of avoiding CGT.

They can also renovate property and claim to be living there while the renovations are done and, therefore, pay no CGT on their main home.

They can also set up an offshore management company, which owns the property, although fortunately Osborne has cracked down on this particular wheeze. Until now CGT wasn't payable on UK properties owned by non-doms. Offshore companies can pay their 'directors' a salary, which can be taxed in a number of different ways.

I expect there are other things people can do - I only know some of them from experience (not mine). The fact is that by juggling assets from income to capital, people can and do avoid paying large sums of tax.

But if this Constable had been sitting in a loft undiscovered, it's unlikely that the finder had ever bought it and paid with taxed money. It's a lucky find. Incidentally, I'm not sure what the rules are now, but if it's been in the owner's possession for more than a certain amount of time (30 years?) there is no CGT or, at least, it's only paid on a sliding scale and inflation is taken into account.

By the way, Thomas Piketty in 'Capital in the Twenty-First Century' makes the same point about being able to make more money from wealth (assets) than from working.