The UK government is considering an overhaul of the capital gains tax rules to allow investors to make an initial investment in companies in the UK.
The move, to be announced in a report due next month, could allow investors who have invested in UK companies to start paying capital gains on their initial investment and reap the benefits of any gains they make.
The government said on Monday that the move will help ease the burden on those in the private sector who were not eligible for the previous capital gains rules.
The changes will allow individuals to initially invest up to £500,000 (€532,000) in UK-listed companies in their lifetime, which will be taxed at a rate of 45% for tax purposes and at a lower rate for individuals.
The government has been under pressure to make the capital gain rules more flexible since the Brexit vote last year, with the UK economy in recession and a Brexit vote expected to be a major factor in the decision.
In a blog post last month, Treasury Secretary Philip Hammond said the changes would help those in business who are struggling to find jobs in the wake of Brexit.
The UK has the lowest tax rate in Europe when it comes to capital gains and is one of the few countries in the world to offer the option to hold the investment for a longer period of time.
However, the changes to the capital loss rules could increase the tax burden for those who have made their initial capital gains, especially in the event of an asset price drop.
For those who do not have the cash to make their initial investments, the change would help to ease the pain of capital gains taxes, the Government said.
It is also expected to lower the threshold for the capital losses exemption for those with assets of less than £2m.
Investors would also be able to make early investments in businesses that do not qualify for the existing capital gains exemption, although this would still apply to those with a value of more than £5m.
Investment firms will also benefit, as the government said they would be able “to use their existing investment credits to support an initial round of funding to build new or upgrade their businesses”. “
The changes are designed to ease pressures on people who are making a purchase at the time of purchase and will make it simpler for those businesses to fund their plans, allowing them to reap the full benefits of the tax relief.”
Investment firms will also benefit, as the government said they would be able “to use their existing investment credits to support an initial round of funding to build new or upgrade their businesses”.
The changes could come into effect in 2019, but they could still be rolled out gradually.