§ I turn now to capital gains tax where I have a number of proposals which will simplify the tax system considerably, produce a really useful saving of work for taxpayers and their advisers as well as for the Inland Revenue, and encourage savings.
§ First, I propose a change in the arrangements for exempting the small gains of individuals. The present exemption for small gains of £50 or less saves very little work, because in most cases it involves a computation of the annual gains and losses to see whether the exemption applies. I propose instead to adopt the disposal proceeds as the criterion and to give exemption where the total proceeds of disposals in the tax year do not exceed £500. This proposal will take out of liability, at small cost, about a quarter of the total of individuals at present liable to capital gains tax—nearly all of them people of modest means. The new relief will apply for 1970–71 alongside the £50 exemption for that transitional year.
§ Next, I believe that the time has now come to abolish the distinction between short-term and long-term gains. The short-term tax was fully justified when we introduced it in 1962; but, now that we have a general tax on capital gains, the additional yield from the higher charge on short-term gains, which is only about £11 million, is in my view too small to justify the complexities which result from having two sets of rules. For 197172 and subsequent years all gains will be subject to the long-term capital gains tax whatever the length of the period of ownership, and the short-term tax will be abolished. Gains on gilt-edged securities realised within 12 months will similarly be charged to capital gains tax if they are held for more than 12 months they will of course continue to be exempt.
§ The third important change which I propose is the abolition of the charge to capital gains tax on death, including the death of a life tenant. To impose this charge on an occasion when the estate, including the accrued gains, is already being charged to estate duty at rates 1380 which rise to 80 per cent. results, in my view, in an altogether excessive burden, and this can cause particular difficulties for family companies. I therefore propose to remove it for deaths after today. The associated 15-year charge on discretionary trusts, which are now within the ambit of estate duty, will also be removed. The cost will be negligible in 1971–72 and the net cost for a full year, after allowing for the additional estate duty, will be about £15 million.