Michael Lansdell discusses the potential changes that could be made to capital gains tax following the pandemic.
According to data released by HMRC, £9.9bn in capital gains tax (CGT) receipts were raised in in 2019/20.
Back in 2020, the chancellor had asked the Office of Tax Simplification (OTS) to review CGT. We all then looked to the spring budget, expecting an announcement about its future, but aside from freezing the annual exemption at its 2020/21 rate of £12,300, CGT hardly got a look in.
But with annual receipts of nearly £10bn, are changes to CGT ultimately inevitable?
All eyes on October…
After the 2020 Budget, the OTS published its second report into CGT, which looked at “practical, technical and administrative issues”. With another budget due on October 27, 2021, is this going to be when Mr Sunak takes on board the advice from the OTS? This included aligning CGT rates more closely with income tax rates and reducing the annual exemption from £12,300 to somewhere between £2,000 and £4,000.
The top tax rate, limited to residential property and carried interest, currently sits at 28 per cent; other assets have 20 per cent liability. According to the OTS’ report, if CGT and income tax rates were aligned, this could raise the Exchequer an extra £14 billion (in theory, of course).
So, now could be the time to review any unrealised capital gains with your accountant, before any announcements about the future of CGT, which could come as soon as budget day later this month. When the OTS was asked to look into CGT, the instruction was to look at the “taxation of the chargeable gains in relation to individuals and smaller businesses”. In other words, any changes could very well impact on you!
Explore your options now, to be in the best position if and when the time comes to make a disposal. At Figurit, we are chartered accountants who are experts at tax planning, so get in touch without delay.
For more information call Figurit (formerly known as Lansdell & Rose) on 020 7376 933.