The Chancellor has ordered a review of Capital Gains Tax (CGT) that could result in the Treasury clawing back billions of pounds from 2nd property owners and investors to help to pay for Coronavirus, reports David Byers in The Times online.
Rishi Sunak turned his attention to the levy as the independent budget watchdog warned that he would need to raise taxes to bring the public finances back under control.
Mr Sunak said last week that he was prepared to take difficult decisions after spending £188 billion on tackling the virus and mitigating its economic damage since March.
The Office for Budget Responsibility said that £60 billion of higher taxes or austerity would be needed to make up the budget deficit.
In ordering the review of CGT, he wants to consider “how gains are taxed compared with other types of income”. Experts said that Mr Sunak may be considering raising its historically low rates to the same levels as income tax, which could bring in £90 billion over five years.
A Treasury source played down the review by the Office for Tax Simplification, however. “It is standard practice to review taxes and CGT is one of the few taxes that has not yet been reviewed. There is absolutely no expectation anything substantive will come out of this in terms of policy change. CGT reform is not in our sights.”
Experts believe The Office of Tax Simplification will NOT examine scrapping the CGT exemption for people selling their main home.
Entrepreneurs’ relief, which allows people to cut their tax bills when they sell companies, is also believed to be in the crosshairs. It allows them to pay a 10 per cent rate of CGT when selling qualifying assets worth up to £1 million. This was down from £10 million before the last budget and it could be that it is removed completely.
The annual exempt allowance for CGT — £12,300 — could also either be reduced or abolished.
The Office of Tax Simplification investigation will be completed by October 12. Any change would probably need to be put out to consultation and could not be realistically implemented before the 2021-22 tax year.