The abolition of indexation allowance was supposed to be corporate only measure when it was announced in the Autumn Budget.
A notice on the government’s website dated 22 November states that it will likely affect any company that disposes of a capital asset which gives rise to a chargeable gain, and any company that holds shares in a share pool.
It adds that the measure has “no impact on individuals or households as it only affects companies”.
However, a standard letter sent to savers has conceded there will be an impact.
Not thought through
The letter shared with Steve Webb, director of policy at Royal London and a former pensions minister, tells savers who complain that: “The impact passed on to individual policy holders is likely to be small.”
“Government hasn’t thought this through – to them it is just another useful £300m,” Webb told PA sister title International Adviser.
“They said it was a corporation tax which doesn’t affect individuals, but the reality is we are just acting as the government’s tax collector.
“Bizarrely, it is in force even though the measure is still before parliament in the Finance Bill.
“However, now that MPs are starting to realise they are being misled you would hope they would challenge government.”
Indexation allowance meant that, prior to January 2018, investment growth which kept pace with inflation was not subject to tax.
