Rishi Sunak appears to have paved the way for significant tax increases in the spring, and that could include a capital gains tax hike for buy-to-let landlords, investors, and those with second homes.
The chancellor told the BBC’s Andrew Marr yesterday that the economy “is experiencing significant stress”, adding that “there’s more stress to come”.
The chancellor will conduct a one-year Spending Review on Wednesday in order to prioritise the response to Covid-19, with a primary focus on supporting jobs.
The government has put in place considerable support for businesses, families and the economy throughout the existing crisis, but at some point, the huge coronavirus bailouts will need to be paid back.
Borrowing in October hit £22.3bn, with public sector debt now over £2tn, leaving the chancellor with some major decisions to make on taxation ahead of a spring Budget.
Sunak is believed to be considering recent proposals by the Office of Tax Simplification (OTS), a Treasury-based body, to reform capital gains tax in the light of the economic and fiscal impact of the Covid-19 crisis, in a bid to restore “sustainable public finances”.
The proposed CGT reform has the potential to bring in an extra £14bn by reducing exemptions and doubling rates, according to the review.
Given that Boris Johnson has ruled out a return to “austerity”, a review of how the tax system works, including the capital gains tax system and pensions tax relief, is almost inevitable.
CGT is currently charged at 10% and 20% for most taxable assets, or 18% and 28% for residential property that is not a main home.
More than 275,000 people paid a total of £9.6bn in CGT in 2018-19.
“I can tell you it’s a very difficult picture,” Sunak told Marr.