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Tackling the budget deficit: is the government planning a raid on capital gains tax?12th November 2020 Corporate
As the UK braces for a definitive plan on how the battered budget deficit is to be plugged, news has surfaced that the government may be looking at a major overhaul of the capital gains tax (CGT) regime.
In July 2020 the Chancellor, Rishi Sunak, commissioned the Office of Tax Simplification (OTS) to carry out a review on CGT to ‘identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent’.
Proposals contained in this OTS report published on 11 November 2020 include (but are not limited to):
- aligning CGT rates with income tax rates;
- slashing the current annual allowance for tax;
- chipping away at allowances, exemptions and reliefs;
- cuts to profits that share investors can make without paying tax; and
- technical adjustments which could increase inheritance taxes.
The OTS estimate that this could, in theory, raise an additional £14 billion a year, however, this would be dependent on ‘behavioural responses’ to the measures. Clearly, if enacted, such proposals could have a significant effect on individuals with substantial investments and assets outside of tax-favourable wrappers or those with second homes, including buy-to-let landlords.
Whilst we wait to see if, how and when the government might embrace or interpret the OTS proposals, it would certainly be a good time to review these proposals in detail and take the appropriate tax advice. If you are a business owner considering an exit / disposal, you might find it useful to refer to our previous blog here which summarises some exit strategy options.