Budget 2021: It would be ‘ludicrous’ to implement proposed increases in capital gains tax

There is speculation that the chancellor Rishi Sunak will announce an increase in capital gains tax rates in the Budget as he looks to find the money required to cover the government’s unprecedented spending and borrowing during the pandemic.

With government debt at a record high, it has been rumoured for quite some time that CGT rates would increase, as part of wider changes to taxation.

The government’s tax adviser recently recommended that CGT be overhauled with proposals that could see the number of people hit by the duty increase sharply.

Sunak, who commissioned the review, has been considering 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.

The move has the potential to bring in an extra £14bn by reducing exemptions and doubling rates, according to the review.

CGT is generally currently charged at 10% for basic taxpayers, but there have been some calls for it to be increased across the board or possibly aligned to income tax rates – at up to 45% for higher rate taxpayers.

As far as residential property is concerned, CGT is currently charged at 18% for basic rate taxpayers and 28% on any amount above the basic rate. Higher or additional rate taxpayers pay 28% on any gains from residential property, along with trustees or personal representatives of someone who has died.

Christine Ross, head of advice at Handlesbanken Wealth Management, told Express.co.uk: “CGT is a minnow in comparison to income tax, but it potentially wouldn’t be quite as unpopular as many people aren’t aware they have a capital gains tax allowance almost as high as their income tax allowance.

“They also may not be aware that this isn’t affected by anything like them being a high earner, for example.”

Toby Harper, the CEO of Harper James Solicitors’, told EYE that potential government plans to hike capital gains tax are “ludicrous”.

He said: “Yes a radical increase in CGT will probably mean more tax revenue in the short term.

“But it could just as likely stifle long term innovation and economic growth and prosperity.”

Harper, whose firm support around 2,000 growing businesses, added: “It is ludicrous to think that capital growth in small high-risk companies is an inevitable consequence of wider economic activity and therefore CGT should be charged at rates equivalent to income tax.

“For most founders of small businesses, they are risking everything moving away from the comfort and security of a salary. The vast majority fail but for the small number that don’t, creating wealth, employment and opportunities for many should be taxed at an appropriate rate to encourage and reward that activity.”

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4 Comments

  1. surrey1

    All this talk of the tax payer having to pay back government borrowing is most odd. The BBC were at it last night too.

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  2. Happy Daze!

    Furlough, grants etc etc ….it was never a ‘free lunch’…..

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    1. surrey1

      History would suggest better to grow your way out of the debt than tax your way out. It was after all money printed out of thin air, so the government fundamentally lent themselves the money.

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  3. paulgbar666

    LL of FHL as well as AST rentals expect to be hit with S24

     

    All those LL who incorporated to escape S24…………………..a waste of time and money.

     

    Short term lettings expect to be hit harder for more tax.

    Those who have 2nd homes expect to be hit for substantially more Council Tax.

    In short 2nd homes of whatever type will be hit for far more taxation.

     

    It will NOT be electorally damaging for the Tories.

     

    So 2nd homeowners be prepared for your business models to be severely compromised.

     

    Is it worth it!!??

     

    Need to be prepared for the Tory taxation onslaught.

     

    Selling up might be a wise business move!!

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