In the UK, Capital Gains Tax (CGT) is generally not the same as Income Tax. Why not?

There is no reason why CGT shouldnt be the same as Income Tax, governments make a judgement and decide how much it wants to tax, or encourage businesses to reinvest. A business can’t reinvest if it sells an asset and pays a high tax rate.

There are of course reliefs for business assets but they have become quite restrictive in recent years. If you have an outdated property you want to sell and buy another paying CGT comes into the calculation. If a high rate of tax has to be paid you struggle on working inefficiently, over the years CGT has been an obstacle to business efficiency.

Regardless of how or whether taxation is spent, IMO there is an inherent unfairness in taxing earnings more than passive income or wealth, particularly when combined with means-tests on low-level benefits such as WFA and child benefit.

... why you think that AI has gone wrong when making some simple calculations.

I didn't say it had Maizie. I didn't refer to the calculations as I wasn't interested in them and your comment about AI seem detached from them and a general comment.

There is more than one way of looking at taxation. There must be as every country doesn't tax in the same way. We already have a couple of Nordic countries which have applied a wealth tax for instance while the right-wing newspapers talk - inaccurately but with their standard quotation marks escape - about the loss of revenue cause by the last budget.

I don't see any tax experts on GN but that doesn't mean we can't work through opinions. Yours cannot be the only one allowed, although that seems to be is what you are insisting on. If that happens there is no point in us being here.

I haven't harangued or insulted you; just replied to your, often personal, attacks or not replied at all. That has recently, frequently seemed the best thing to do.

but we haven't all lost our ability to think critically.

Well, your hatred of anything that smacks of understanding the way that taxation works in the domestic economy seems to have destroyed any ability you might have had think logically.

Instead of haranguing, and insulting me perhaps you could employ your 'critical thinking' ability in explaining why you think that AI has gone wrong when making some simple calculations.

When AI rules the world you'll be in a state of distrust and disbelief of everything it does....

So all the people who accept that not every printed word is accurate find themselves unable to believe any of it! Really Maizie? You may feel the need to take on the total belief or disbelief when you find a single point of agreement or disagreement but we haven't all lost our ability to think critically.

Why are you so prepared to make such foolish posts just because someone doesn't agree with your every word? Surely a discussion/debate on any subject is because we can all admit we don't know everything. Sometimes we may know very little but want to know more but what no debate needs is misleading intransigence.

Lahlah65

PoliticsNerd

Just in case anyone believes this silliness of course AI can be wrong. It basically depends on data used in the training, which may reflect historical inequalities, stereotypes, or incomplete information.

This…..

What a sad pair. When AI rules the world you'll be in a state of distrust and disbelief of everything it does....

Would you care to point out where it has gone wrong?

Or, perhaps one of you would like to trace £100 as it moves through the economy being taxed as it is used for consecutive transactions?

M0nica

MaizieD

M0nica

Capital gains are not necessarily income. We are paying a small amount of caapital gains this year because we sold our holiday cottage in France last year.

We simply turned a stone and mortar asset into a cash asset. A one year event, not to be repeated. It wasn't very much and we spent far more renovating the property than we made in capital gains over 33 years.

If it isn't 'income', what is it, MOnica.

It is an addition to the revenue/income you have available to spend or save as you wish. What you put into it over the years was purely for your own benefit. It would have been different if you were using it for a business.

As I said in my post, it is transferring capital from one form to another. The money has since been reinvested. We have not used any of it as income because it is still what it always was - a capital asset.

It was income that you chose to invest. No different from any other income that you might choose to invest.

Why should calling it 'capital' mean that it is taxed at a lower rate?

Usedtobeblonde

I did say in my post it was a second house.
We bought it for my S who was in what turned out to be a doomed relationship.
I would have kept it and rented it out, eventually downsizing into it ourselves but my H didn’t like that idea.

This happens a lot in practice you buy a property as a holiday home, rent it out for a while, when you retire move into it, no CGT on either property. You are supposed to declare the period it was rented out, but it gets forgotten or is below the CGT threshold. It’s very difficult to keep track of 2nd homes.

MaizieD

M0nica

Capital gains are not necessarily income. We are paying a small amount of caapital gains this year because we sold our holiday cottage in France last year.

We simply turned a stone and mortar asset into a cash asset. A one year event, not to be repeated. It wasn't very much and we spent far more renovating the property than we made in capital gains over 33 years.

If it isn't 'income', what is it, MOnica.

It is an addition to the revenue/income you have available to spend or save as you wish. What you put into it over the years was purely for your own benefit. It would have been different if you were using it for a business.

As I said in my post, it is transferring capital from one form to another. The money has since been reinvested. We have not used any of it as income because it is still what it always was - a capital asset.

The issue I have with CGT is that there is no allowance for inflation. No issue with gains above inflation being taxed at the same rate as income tax.

PoliticsNerd

Just in case anyone believes this silliness of course AI can be wrong. It basically depends on data used in the training, which may reflect historical inequalities, stereotypes, or incomplete information.

This…..

Just in case anyone believes this silliness of course AI can be wrong. It basically depends on data used in the training, which may reflect historical inequalities, stereotypes, or incomplete information.

You are comparing apples with pears.

What ever the tax is called, it is taxation. No 'apples and pears' about it.

It appears you may be suggesting the first argument is "specious" because it doesn't align with your beliefs, rather than engaging with the actual reasoning or evidence behind it.

The double taxation argument is specious. The state issued money is taxed over and over again until it is finally taxed away.

AI explains:
Start
🧾 Step 1: Income Tax and National Insurance (when earned)
Let’s say a person earns £100 in wages.

Assume they are a basic-rate taxpayer:

Income tax: 20%

Employee National Insurance (NI): 8% (approx., varies slightly)

Net income after tax and NI:

£100 – £20 (income tax) – £8 (NI) = £72

So £28 is taxed immediately when the person earns the money.

🛍 Step 2: Spending the Money (VAT)
Suppose they spend the £72 on goods and services subject to 20% VAT (standard rate in the UK).

£72 / 1.20 = £60 (pre-VAT price)

£12 is VAT

So now another £12 is taxed, and only £60 reaches the business providing the goods.

🏢 Step 3: Business Taxes
That £60 is now business revenue. Let's suppose the business:

Pays 25% Corporation Tax on profits

Spends 50% on costs (e.g., wages, materials)

So profit = £30

Tax = 25% of £30 = £7.50

Now, £7.50 is taxed again.

👷 Step 4: Repaid as Wages (Recycled Earnings)
Assume the business pays the remaining £30 as wages to staff. Again:

Income tax = 20% → £6

NI = 8% → £2.40
= Total tax: £8.40

The worker keeps: £21.60

🛒 Step 5: That worker spends the £21.60 (again taxed with VAT)
VAT = £3.60

Business gets: £18

📊 Total Tax Collected So Far:
StageAmount Taxed
Income tax + NI (Step 1)£28.00
VAT on initial spending£12.00
Corporation tax£7.50
Income tax + NI (Step 4)£8.40
VAT on next spending£3.60
Total£59.50

So of the original £100, ~£59.50 has been taken as tax by the time it has cycled through two earn-and-spend loops.

🔁 What if it continues cycling?
Each round of wages and spending is taxed again at each stage (income tax, NI, VAT, corp tax), although diminishing returns apply as less money remains.

Over infinite cycles, almost the entire original £100 would be taxed away—though in practice, savings, tax shelters, and consumption choices change this.

Finish

AI has no biases

M0nica

Capital gains are not necessarily income. We are paying a small amount of caapital gains this year because we sold our holiday cottage in France last year.

We simply turned a stone and mortar asset into a cash asset. A one year event, not to be repeated. It wasn't very much and we spent far more renovating the property than we made in capital gains over 33 years.

If it isn't 'income', what is it, MOnica.

It is an addition to the revenue/income you have available to spend or save as you wish. What you put into it over the years was purely for your own benefit. It would have been different if you were using it for a business.

Capital gains are not necessarily income. We are paying a small amount of caapital gains this year because we sold our holiday cottage in France last year.

We simply turned a stone and mortar asset into a cash asset. A one year event, not to be repeated. It wasn't very much and we spent far more renovating the property than we made in capital gains over 33 years.

One argument would be that taxing income disproportionately affects 'working people' who are also means-tested in the name of 'targeting' things that the better off are less likely to need, such as top-up benefits. Many people become persuaded that those who 'can afford' to pay for things such as prescriptions or bus passes should do so, and even the pensions of those who have paid decades of NI are routinely threatened with means-tests, which are a means of keeping people 'in their place'.

Those with inherited wealth, or who have 'made' money passively on property that has risen in value, on the other hand, pay lower rates of tax, and those who can afford not to work at all (so don't have an income) also escape paying direct taxes. I would argue that VAT on goods bought with someone else's money does not mean that the person doing the shopping is paying tax, but maybe that is debatable.

I did say in my post it was a second house.
We bought it for my S who was in what turned out to be a doomed relationship.
I would have kept it and rented it out, eventually downsizing into it ourselves but my H didn’t like that idea.

Chocolatelovinggran

PoliticsNerd, CGT only applies to second homes. Your primary residence is exempt.

Quite. Houses are a different argument to income in my opinion. Perhaps that could be another thread? There is probably quite an in depth discussion to be had.

We as a nation are taxed every which way as it is on everything apart from the air we breathe. (GrannyGravy13)

The UK's tax burden is moderate relative to most other developed countries. What seems to have happened during the previous Government is that many don't feel they are getting value for money. And, of course, Labour gas failed to put this right overnight.

PoliticsNerd, CGT only applies to second homes. Your primary residence is exempt.

Very good point about VAT. MaisieD

MaizieD you are, I believe, wrong in this instance. You are comparing apples with pears.

The comparison between two forms of income tax seems reasonable to me. You dismisses a reasonable arguement without taking into account that you are comparing a sales tax with income taxes. It appears you may be suggesting the first argument is "specious" because it doesn't align with your beliefs, rather than engaging with the actual reasoning or evidence behind it.

GrannyGravy13

MaizieD I think your post illustrates exactly why CGT should be at its current rates.

We as a nation are taxed every which way as it is on everything apart from the air we breathe.

I don't think it proves it at all. Taxation has a purpose, as I pointed out, and there's no compelling reason why what is essentially income should be taxed differently from any other income.

If the government didn't issue any money you'd soon be in bother...

Usedtobeblonde

We owned a second home , bought for a S , very briefly in 2002/3.
When we sold it CGT was 40%.
It came down after that date to I think, 24% so it was more than income tax in those days.

Which would seem equally wrong to me Usedtobeblonde, if it was your only or main residence. I do think there is a difference when it comes to houses. Houses are/should be homes first and foremost.

MaizieD I think your post illustrates exactly why CGT should be at its current rates.

We as a nation are taxed every which way as it is on everything apart from the air we breathe.