Who said what?
The Chancellor of the Exchequer, Rishi Sunak, has announced a review of the Capital Gains Tax (CGT) regime. It was prompted by a report published by the Office for Budget Responsibility (OBR) which highlighted that the deficit in Government spending was likely to exceed £350 billion this year as a result of the protective measures put in place to shield businesses and households during the pandemic.
The OBR said that the Government would need to look at tax rises or introduce a range of spending cuts to rebalance government finances. Estimate that the Treasury would see significant falls in tax receipts from CGT over the next couple of years due to the fall in value of property and other assets are likely to put pressure on the Chancellor to increase taxes to make up for the loss of revenue.
What does this mean for you?
Changes are more likely than not but would not be unprecedented or indeed unexpected given the report from the OBR. Any firm changes which are coming will be not announced until the Autumn Statement but could include an alignment of CGT and income tax rates, a reduction in the annual CGT allowance or possibly its total removal.
What steps might you need to consider in response?
Put simply: plan. A discussion with your adviser would be essential to identify any current or future exposure to CGT, and how heavily future planning has been built on the current rules and regulations.
It would be a good time to explore possible alternative mitigation strategies and, above all, maintain flexibility in order to respond as appropriate to any changes as and when they are announced.
The Chancellor has also made clear that he wants the Office of Tax Simplification (OTS) to look at how 'the present rules can distort behaviour'. This follows on from the OTS last year putting forward plans to overhaul the Inheritance Tax regime…another area which may provide scope for increased revenue for the Treasury.
The Chancellor is clearly looking across the board for opportunities to raise revenues in the wake of the huge monetary intervention that has been made to counteract the economic shock of lockdown and CGT is a target he is unlikely to ignore.
Read the CGT review coping document from the OTS
Read the Chancellor’s letter to the OTS
Tax treatment depends on individual circumstances and may be subject to change in the future.
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