Possible CGT Capital Gains Tax Overhaul In Play

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May 24th 2022
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Possible CGT Capital Gains Tax Overhaul In Play

Chancellor requests research from OTS on the effects of changing the way profits on assets are taxed.

Under current tax rules, profits on assets or property are subject to capital gains tax. The rates differ depending on the type of asset (property, shares, art etc) and the amount of other income the individual has earned during the tax year.

The percentage taxed is higher for property than it is for other types of asset.

The Chancellor has now put the Office of Tax Simplification on the task of evaluating the effects of changing the way CGT is charged particularly with an objective to increasing revenue for the Taxman.

The move which could be brought in under the headline of a simpler method of taxation could see restructuring to the principal private residence relief. This is a relief on paying tax on the main home - for example when moving house, rather than selling an additional home/holiday home or buy to let.

The Treasury receives nearly £9 billion per year through capital gains taxes, which pales in comparison to other forms of taxation, but a restructure could potentially help with balancing the books.

Rishi Sunak could opt to create a tapering annual exempt amount, targeted at higher earners or higher profits. At the moment there is a blanket £12,300 annual exempt amount in the 2020 tax rates.

The last time a major change was made to CGT was in the 2016-2017 tax year where the two-tier bands were introduced. These bands are still in force now where 18% basic/28% higher is levied on residential assets and 10% basic/20% higher is levied on other types of asset. The difference in rate depends on how much the taxpayer has earned from other sources.

Whatever the Chancellor chooses to do with the research will be revealed this Autumn, when it quite likely a number of tax rises will be announced.

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