Capital Gains Tax warning after CGT identified as ‘easy target’ for Rishi Sunak’s Budget

World News

Rishi Sunak grilled over 'wishy-washy' plans by reporter

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Capital Gains Tax (CGT) is a levy charged on the profit a person makes when they sell or ‘dispose of’ something which has increased in value. It is only the gain which is taxed, rather than the amount of money a person receives. However, some assets are tax-free. Britons also have a tax-free allowance for CGT, which currently stands at £12,300, or £6,150 for trusts. 

However, one expert is inclined to believe the Chancellor could be making changes to the tax in his upcoming Budget on October 27, 2021, which could affect many.

A review into Capital Gains Tax concluded earlier in the year after being conducted by the Office of Tax Simplification (OTS), a body which often feeds back its findings to Government.

The two reports from the OTS made recommendations of sweeping changes, for example, aligning CGT rates with income tax, and removing the capital gains uplift on death.

They also proposed a reduction to CGT allowances which many people will bear in mind to check if they are liable for a tax bill.

There were also other technical recommendations which included changes to what is defined as a capital gain as opposed to income.

This, for example, looks at when profits are extracted from a small company. 

Ami Jack, Head of National Tax at Smith and Williamson, commented on the matter, identifying Capital Gains Tax as a potentially “easy target” for the Chancellor in the upcoming Budget.

She said: “Significant increases to the CGT rate, or changes affecting small companies, could risk discouraging potential entrepreneurs, stunting growth and job creation. 

Retirement age warning: Some set to leave work at 81 [ANALYSIS]
NatWest offers £150 ‘reward’ plus 3% interest to Britons – act now [INSIGHT]
Mortgage free: Brits given ‘once in a lifetime’ chance to pay off debt [UPDATE]

“Given the need for economic recovery, the Chancellor may protect reliefs that encourage investment and entrepreneurship. 

“Options could be a smaller rate rise, say to 30 percent, CGT rate increases only on disposals of more passive types of investment, such as on rental property, as well as more technical changes to CGT reliefs.”

However, Ms Jack also identified that there is a potential for immediate change with any Budget announcement.

As a result, people may wish to consider the matter now as well as their assets and what steps they wish to take.

She continued: “Subject to investment decisions, consideration could be given to accelerating planned disposals or gifts whilst the CGT rates are known and remain low. 

“Alternatively, the Government could choose to give notice of a future increase to incentivise disposals and accelerate CGT receipts.”

However, as the matter is not set in stone, Ms Jack warned there could be some level of risk if a person takes action before the Budget.  

For example, the Chancellor may decide to leave Capital Gains Tax alone and instead look for other areas to raise money for the Treasury.

What is happening where you live? Find out by adding your postcode or visit InYourArea

Alternatively, action which is taken before the next Budget could then be ensnared by another subsequent change. 

Ms Jack concluded that it is unlikely CGT rates falling will occur, so Britons may wish to bear this in mind.

If a person’s taxable gains are above their CGT allowance, they will need to report this and then pay the tax they owe.

Thankfully, the Government’s official website contains a full level of guidance on the matter, including newly introduced rules since 2020.

Source: Read Full Article