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News Update: Capital Gains Tax is Under Review

Capital Gains Tax (CGT) is under review with the Office of Tax Simplification (OTS) after a request from the Chancellor, Rishi Sunak, in what may be an attempt to claw back tax revenues to offset the unprecedented financial support provided during the Covid-19 pandemic. How could this affect you?

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Why review CGT?

The requested review of CGT is to also include aspects of the taxation of chargeable gains in relation to individuals and smaller businesses. It could well be a pot of gold for Mr Sunak to tap into.

The reason for this is that currently the very generous annual exemption enables £12,300 of net gains (20/21) to be realised, before any tax becomes due. The tax on any gains after this is only 20%, and 28% for residential property, meaning that over half of taxpayers* declaring CGT didn’t pay any, or paid just at the basic rat.

Recent data* shows that in 17/18, less than 300,000 people paid CGT, due to exemptions and tax planning. The majority of the CGT paid in that year, was from 3% of taxpayers, contributing large sums in excess of £1 million.


When may there be a change?

There is no certainty – at the moment, it is only under review.

However, this isn’t the first time, this topic has been on the government agenda. As recent as the last election, the Labour and Liberal Democrat parties, put forward for capital gains to be taxed at the same rates as income tax. They also called for the annual exemption to be abolished, or reduced significantly to £1,000.

CGT isn’t one of the taxes by where the Conservatives have promised a rate freeze, so it really is anybody’s guess as to which way this could go.

The OTS have set a deadline of 12 October for all comments to be submitted. Therefore, the Autumn Budget we may hear something further on this topic.

Tax planning with precaution

It is worthwhile reviewing your portfolio with a financial adviser to work out what the implications of a tax change like this could be for you.

If you were on the fence about realising any gains, now could be prudent with the guarantee of the current CGT structure.

Tax planning for doctors & dentists
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
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