Review Of Capital Gains Tax Requested By Government In Light Of Pandemic
In a bid to raise money for the Treasury after the coronavirus pandemic, a new report suggests doubling Capital Gains Tax rates and slashing exemptions.
The report, which comes from the Office for Tax Simplification (OTS), suggested bringing the tax in line with income tax – doubling the rates, which are currently set at 10% for basic-rate taxpayers and 20% for those on higher rates.
The OTS also suggested getting rid of exemptions and reliefs, such as getting rid of the rule that allows inherited assets to be passed on free of capital gains tax.
The Chancellor Rishi Sunak doesn’t have to accept these changes – the Office for Tax Simplification did a similar report on inheritance tax in 2019, which so far hasn’t been adopted – but experts say the changes have been expected for some time.
Expert Opinion“This could be seen as yet another tax grab on responsible middle-income families who have prudently saved for a rainy day rather than the Government biting the bullet and taxing the UK profits of large multinational companies.
“It’s a complicated system full of anomalies, so a simplification of the CGT rules would be a welcome one for professionals and those looking to sell additional assets. It’s also been noted some of the reliefs available are very generous and would be obvious targets for reform.
“However, the changes proposed by the OTS are not unexpected and had been widely trailed by those in the industry, where the gap between tax on earned income and unearned growth on capital has long been seen as arbitrary.
“It is imperative that individuals seek planning advice now and look at what they can do to maximise on current reliefs before those tax reliefs or lower tax rates are taken away.” Vicky Day - Senior Associate Solicitor
Chancellor Rishi Sunak requested a review of the Capital Gains Tax (CGT) system earlier this year in light of the coronavirus pandemic, where many experts have predicted tax increases in the coming years to pay for the extended borrowing the Government has undertaken during the pandemic.
Currently, CGT is levied at 18% basic taxpayer rate or 28% higher taxpayer rate on property. On other assets such as art, jewellery or any business shares among others, the rate is 10% for basic-rate and 20% for higher-rate taxpayer. This is much lower than the rate of Income Tax, and therefore uplift may be possible to prevent planning for gains rather than income to reduce the amount of tax payable.