Rishi Sunak: What to expect from budget with Victoria Scholar
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The deadline to file a tax return for those selling UK residential property will be extended, it was announced yesterday. “In the small print announced in the Budget, for those selling UK residential property the deadline to file a tax return will be extended from 30 days to 60 days from midnight tonight,” Tim Walford-Fitzgerald, Private Client Partner at accountancy firm HW Fisher said yesterday.
“This is welcome news and it is positive to see that the Chancellor has recognised the reality of these transactions. To anyone selling a property and up against tight deadlines to receive registrations you can breathe easy.”
It comes after fears the wealth levy could be aligned with income tax, having already been frozen until 2026 in the last Budget. Many have suggested wealth taxes should be targeted as a fairer way to pay for pandemic spending and contribute towards the health and social care required in the aftermath.
There were fears tax hikes could be in store after the Government broke its pledges on National Insurance and the state pension triple lock. National Insurance contributions were increased by 1.25 percent, and the state pension triple lock was suspended for a year.
Capital Gains is the profit made when an asset such as shares or property is sold for more than it cost to acquire.
An extra £16billion a year could be raised if the Government increases the low tax rates on profits from shares and property, bringing them back into line with taxes on salaries.
Capital Gains Tax is currently set at 18 or 28 percent for property depending on which tax band a person falls into.
Figures from the Treasury released in August show that its Capital Gains Tax receipts hit £9.8billion in the 2019/20 tax year, up four-fold from the £2.5billion achieved a decade ago.
Torsten Bell, head of the independent thinktank Resolution Foundation said: “There is big money in the capital gains tax system. “The government should target well-used exemptions in the Capital Gains Tax regime that save wealthy investors about £8billion a year, including a £2.3billion saving by those who die before their gains are taxed.”
The think tank said equalising the tax rate on capital gains with income tax “could generate at least £90billion in extra revenue over five years”.
Bringing Capital Gains Tax rates more in line with Income Tax could mean a switch to 20 per cent rates for people on the basic rate, 40 per cent for the higher bracket and 45 per cent for the additional rate bracket.
A report by the Office of Tax Simplification recommended making the move last November, but the Chancellor decided against it at March’s Budget, despite strong rumours.
Andy Butcher, chartered financial planner at Raymond James said: “Capital Gains Tax was rumoured to be an easy target at the last Budget, then surprisingly was left alone, but that didn’t stop many wealthy individuals taking pre-emptive action back in March, when the rumours were rife, to realise gains and pay tax before a potential hike.
“One would hope that any change to CGT would be well telegraphed, and people would be given a grace period to act before the change was made, but it’s precisely this uncertainty that is leading to action, allowing the Chancellor to chalk up the increased tax revenue as a win, without implementing an actual tax rise.”
Analyst at AJ Bell, Tom Selby, told Express.co.uk in August that it is “very possible” capital gains tax will be aligned with income tax.
Mr Selby said: “The Office for Tax Simplification’s proposals edged towards aligning the two taxes.
“The impact of that would be someone disposing of an asset would pay significantly more tax than they do at the moment. There would be a big impact on landlords for example, people who have second properties.
“At the moment, Capital Gains Tax is charged at 10 percent or 20 percent depending on whether you are a lower rate or higher rate taxpayer.
“If this was aligned with Income Tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent. “So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”
Gill Philpott, a tax and trusts specialist at Ascot Lloyd, wrote for FT Adviser this week, suggesting Capital Gains Tax and pensions could be targeted in the Budget.
Ms Philpott said: “Another way to raise capital is not to increase tax rates but to reduce reliefs or allowances.
“The OTS made a recommendation to scale back the capital gains tax exemption to below £5,000, which would bring more taxpayers into the Capital Gains Tax net, tax growth on wealth, and increase tax take.
“With online reporting of gains, this could be achieved with little extra work for HM Revenue & Customs.”
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