Possible changes to Capital Gains Tax as The Chancellor commissions a review of the regime
This week the Chancellor Rishi Sunak commissioned a review of the UK’s Capital Gains Tax (CGT) regime.
In simple terms, CGT is a tax you pay on the profit when you sell an asset that’s increased in value. The tax is levied on the gain you make rather than the money you receive. Each individual has an annual CGT exemption of £12,300, gains above the allowance attract CGT of 10% for basic rate taxpayers and 20% for higher and additional rate payers; or 18% and 28% respectively where the gains relate to residential property. Business Asset Taper Relief may be available if the asset is a business asset.
The Chancellor has asked the Office of Tax Simplification to investigate how capital gains are taxed for both individuals and smaller businesses, to improve simplification and “ensure the system is fit for purpose.”
Mr Sunak said: “I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”
Given the current environment and the impact that the coronavirus pandemic is expected to have on the economy it has been suggested that this is a pre-emptive move to increase the rates of CGT. Given that the Office of Budget Responsibility reported that the UK would need to increase tax revenues by £60bn over the next decade to restore the public finances back to what it was pre- Coronavirus reviewing a review of the UK tax system is not unexpected.
Partner and head of tax at Cowgills, Lisa Wilson commented: “It is not a question of if taxes will rise, but rather a question of when and which taxes. The changes could happen as soon as the Autumn Budget, expected to take place in October however I think it more likely that the Chancellor will allow the economy to recover further before introducing higher tax charges.
“Our message to businesses is if you are thinking of realising a gain or exiting your business you might want to accelerate the disposal whilst the CGT tax rate is still 10% or 20%. If you have properties that you wish to sell into the business or even extract out this is the time to consider disposing whilst the tax rate is certain.”
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