Capital gains tax in Britain has been subject to endless modification since it was introduced in 1965. From 1988 to 1998, the regime was logical though harsh. Capital gains were measured after allowance for inflation but then taxed as income, so for most individuals the rate was 40 per cent.

In 1998, indexation was scrapped and taper relief introduced, so that the rate of tax on business assets fell over 10 years to 10 per cent. The 10-year period was reduced to four in 2000 and to two in 2002. Thus the effective tax rate on the sale of a privately owned business was cut from 40 per cent – one of the highest rates in the developed world – to 10 per cent – one of the lowest rates in the developed world.