As Britain hopes to tackle its £163 billion deficit, the capital gains tax rate is expected to go up in the new UK coalition government’s emergency budget, which will be announced on 22 June.

The newly created Office for Budget Responsibility (OBR), which the Conservative/Liberal Democrat government says will provide independent economic forecasts for the economy and public finances, will assess the public finances and the economy for the emergency Budget.

This will be the first time that the forecasts will not be determined by the finance minister's judgements, as he will accept the forecasts from the OBR, which is chaired by Sir Alan Budd, a senior UK economist and former member of the Bank of England's interest rate setting panel, for the budget and pre-budget report. Finance minister George Osborne will, however, retain responsibility for fiscal policy.

It is expected that the government will raise the capital gains tax - currently at 18 per cent - but it is unclear about the exact extent of any rise or what type of assets will be affected. However, it is understood that CGT increases will be limited on business assets.

Baker Tilly, the UK-based accountancy and business advisor, predicts that in a new system “even the basic rate of income tax, 20 per cent, is higher than the current CGT rate of 18 per cent, while the higher rate of income tax is 40 per cent.”

The firm believes that CGT is likely to be levied at two rates, 20 per cent and 40 per cent; it does not expect that it will be as high as 50 per cent. According to Baker Tilly’s calculations, gains that take the vendor over the threshold of £37,400 will be liable to tax at 40 per cent.

The advisor firm does not expect the new rates to be introduced before April 2011. The new rates could make alternative investments that are not taxed under CGT, like investment bonds offering five per cent annual tax-free returns of capital, increasingly interesting.

There is also a possibility of overseas gains facing a maximum tax rate of 64 per cent, however, it remains to be seen what exactly the government will do.

According to the government, there will be “generous exemptions for entrepreneurial business activities”,  however, it is unclear as yet what exactly that will mean.

Furthermore, the new government is expected not to increase the allowance for inheritance tax to the £1,000,000 mark, an issue that has caused great controversy during the election campaign.

The new cabinet hopes to agree £6 billion of cuts in this year’s spending.