The wealth levy could be aligned with income tax, having already been frozen until 2026 in the last Budget. Many have suggested wealth taxes should be targeted as a fairer way to pay for pandemic spending and contribute towards the health and social care required in the aftermath.
Under the current system, income – which covers earnings such as salaries – is taxed at a maximum rate of 45 percent.
Figures from the Treasury released in August show that its Capital Gains Tax receipts hit £9.8billion in the 2019/20 tax year, up four-fold from the £2.5billion achieved a decade ago.
Torsten Bell, head of the independent thinktank Resolution Foundation said: “There is big money in the capital gains tax system. “The government should target well-used exemptions in the Capital Gains Tax regime that save wealthy investors about £8billion a year, including a £2.3billion saving by those who die before their gains are taxed.”
The think tank said equalising the tax rate on capital gains with income tax “could generate at least £90billion in extra revenue over five years”.
Bringing Capital Gains Tax rates more in line with Income Tax could mean a switch to 20 per cent rates for people on the basic rate, 40 per cent for the higher bracket and 45 per cent for the additional rate bracket.
A report by the Office of Tax Simplification recommended making the move last November, but the Chancellor decided against it at March’s Budget, despite strong rumours.
Andy Butcher, chartered financial planner at Raymond James said: “Capital Gains Tax was rumoured to be an easy target at the last Budget, then surprisingly was left alone, but that didn’t stop many wealthy individuals taking pre-emptive action back in March, when the rumours were rife, to realise gains and pay tax before a potential hike.
“One would hope that any change to CGT would be well telegraphed, and people would be given a grace period to act before the change was made, but it’s precisely this uncertainty that is leading to action, allowing the Chancellor to chalk up the increased tax revenue as a win, without implementing an actual tax rise.”
“If this was aligned with Income Tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent. “So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”
Gill Philpott, a tax and trusts specialist at Ascot Lloyd, wrote for FT Adviser this week, suggesting Capital Gains Tax and pensions could be targeted in the Budget.
Ms Philpott said: “Another way to raise capital is not to increase tax rates but to reduce reliefs or allowances.
“The OTS made a recommendation to scale back the capital gains tax exemption to below £5,000, which would bring more taxpayers into the Capital Gains Tax net, tax growth on wealth, and increase tax take.
“With online reporting of gains, this could be achieved with little extra work for HM Revenue & Customs.”