Capital gains tax may be focused upon by Rishi Sunak soon as the Chancellor is forced to address public spending. Huge levels of debt have been built up in response to coronavirus and tax reform could be on the horizon to cover the costs.
In 2020, the Office for Tax Simplification (OTS) proposed measures (following a request from Rishi Sunak) to equalise CGT with income tax rates.
This was discussed in a report released in November 2020, where the OTS’s extensive consultation revealed a range of areas in which CGT is counter-intuitive and creates odd incentives.
Within this report, some respondents argued that CGT is a barrier to economic growth, others that it is a barrier to a more equitable society.
On top of the income tax proposals, rates and boundaries, annual exempt amounts, interaction with lifetime gifts and Inheritance Tax and business relief were also looked at.
As a result of these challenges, the NRLA are calling on the Chancellor to use the tax “more smartly” in the upcoming budget.
They recommend that to support the Government’s ambitions for homeownership, there should be a BGT exemption or reduction where landlords sell properties to sitting tenants.
This is a policy which has previously been supported by the now Housing, Communities and Local Government Minister, Eddie Hughes MP.
Ben Beadle, the Chief Executive of the NRLA, commented on this: “Increasing Capital Gains Tax would reduce churn in the rental market undermining the flexibility it has always been good at providing.
“A tax hike would be a kick in the teeth for all those who have invested in property to provide security for the future for themselves and their families.
“The Chancellor needs to end the war on the rental market and recognise the importance of a healthy and vibrant rented housing sector.
“Tax should be used more smartly, not as a blunt attack on the market.”
Generally, CGT is paid on the gain made following the selling of:
- Most personal possessions worth £6,000 or more, apart from a car
- Property that is not a main home
- A main home if the owner has let it out, uses it for business or it’s very large
- Shares not held in an ISA or PEP
- Business assets
The actual charges levied will depend on the payee’s income tax rate.
Higher or additional rate taxpayers will pay 28 percent on gains from residential property sales.
For other chargeable assets, 20 percent will be levied.
Basic rate taxpayers will pay a rate that is dependent on the size of the gain, their taxable income and the type of asset the gain is from.
Do you have a money dilemma which you’d like a financial expert’s opinion on? If you would like to ask one of our finance experts a question, please email your query to firstname.lastname@example.org.