The Treasury has rejected proposals to raise capital gains tax rates to align them with income tax and reduce the levy’s annual allowance.

The Office of Tax Simplification (OTS) has in the past year released proposals to simplify capital gains tax following on from its review into CGT requested by the chancellor Rishi Sunak last year.

The report by the OTS, which highlighted a broader concern about the low level of public awareness of the tax, made 14 recommendations, which included the proposal to consider raising the rates and lowering the allowance.

However, the suggestions made by the group in its first report on CGT have now been passed over. In a letter to the OTS, sent yesterday, the Treasury made it clear that the recommendations are unlikely to be implemented in the near future.

Lucy Frazer, financial secretary to the Treasury, wrote: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.

“The government will continue to keep the tax system under constant review to ensure it is simple and efficient. Your report is a valuable contribution to that process.”

But the government has accepted five recommendations made by the OTS in its second report on CGT – which covered much more narrow, technical issues, which you can read by clicking here.

In the same letter, the Treasury also rejected making any changes to inheritance tax – as was suggested by the OTS in reports in 2018 and 2019.

The letter was released as part of a number of documents published on the Treasury’s second so-called tax and administration day, in which it sets out details of proposed changes to and consultations on the tax system.