While a flat rate 18% tax on capital gains may be bad news for basic rate tax payers, it is likely to be good news for City private client investment operations and, in the longer run, for most investors as well. 

The Chancellor is regularly besieged by calls for the abolition of Capital Gains Tax on shares. It will never happen, though, for the intention of the tax is less to raise revenue than to stop investors protecting their total returns through capital appreciation. 

The tax has become highly complicated, however, tying up valuable resource in expertise, computer power and time while generating no real wealth for the nation. Many private client investment firms have invested heavily into systems that overcome these complexities to produce reliable reports and estimates of tax payable. 

Loading client details on to a tax system can be highly labour intensive particularly where a client has had a penchant for scrip dividends. The reports themselves are only as good as the information loaded into the system. The cost of administering these systems is borne, ultimately, by clients. 

So while abolition may not have been an option, simplifying the tax via a flat rate removes many of its disadvantages. Before we get to that happy state, however, firms will have to take their clients’ portfolios and un-index them: stripping back holdings to their base cost, ex-indexation and taper relief.  

With indexation, taper relief and pooling gone, calculation will be far simpler heralding a longer term reduction in costs, fees and angst.