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Taper relief

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Taper relief
Aims to reduce the amount of capital gains Tax that you have to pay when you sell shares, to account for the effect of Inflation.
    
Taper relief works by reducing the gain by a 5% a year for every year it was held regardless of the base cost. This is to be abolished from Tax year 2008/09. Also known as indexation relief.
    
Taper relief was introduced into the UK taxation regime with effect from 6th April 1998. Its purpose is similar to indexation, in that it aims to reduce the amount of capital gains Tax you have to pay when you sell shares, to account for the effect of Inflation.
    
But there is a critical difference. Whereas indexation works by increasing the base cost of an asset, taper relief works by reducing the gain by a 5% a year for every year it was held regardless of the base cost. This is significant because if the base cost of an asset was zero, indexation does not help. Taper relief, on the other hand, does.
        
Indexation is a technique to adjust income payments by means of a price index. This to keep up the purchasing power of the public after Inflation.
Posted by  Information Management Network LLC., Information Management Network LLC.
 
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