Capital Gains Tax warning as CGT identified as ‘easy target’ for Rishi Sunak’s Budget | Personal Finance | Finance
[ad_1]
Capital Gains Tax (CGT) is a levy charged on the profit a person makes when they sell or ‘dispose of’ something which has increased in value. It is only the gain which is taxed, rather than the amount of money a person receives. However, some assets are tax-free. Britons also have a tax-free allowance for CGT, which currently stands at £12,300, or £6,150 for trusts.
However, one expert is inclined to believe the Chancellor could be making changes to the tax in his upcoming Budget on October 27, 2021, which could affect many.
A review into Capital Gains Tax concluded earlier in the year after being conducted by the Office of Tax Simplification (OTS), a body which often feeds back its findings to Government.
The two reports from the OTS made recommendations of sweeping changes, for example, aligning CGT rates with income tax, and removing the capital gains uplift on death.
They also proposed a reduction to CGT allowances which many people will bear in mind to check if they are liable for a tax bill.
READ MORE: State pension: Britons with joint pain could get £358 boost to income
“Given the need for economic recovery, the Chancellor may protect reliefs that encourage investment and entrepreneurship.
“Options could be a smaller rate rise, say to 30 percent, CGT rate increases only on disposals of more passive types of investment, such as on rental property, as well as more technical changes to CGT reliefs.”
However, Ms Jack also identified that there is a potential for immediate change with any Budget announcement.
As a result, people may wish to consider the matter now as well as their assets and what steps they wish to take.
She continued: “Subject to investment decisions, consideration could be given to accelerating planned disposals or gifts whilst the CGT rates are known and remain low.
“Alternatively, the Government could choose to give notice of a future increase to incentivise disposals and accelerate CGT receipts.”
However, as the matter is not set in stone, Ms Jack warned there could be some level of risk if a person takes action before the Budget.
For example, the Chancellor may decide to leave Capital Gains Tax alone and instead look for other areas to raise money for the Treasury.
Alternatively, action which is taken before the next Budget could then be ensnared by another subsequent change.
Ms Jack concluded that it is unlikely CGT rates falling will occur, so Britons may wish to bear this in mind.
If a person’s taxable gains are above their CGT allowance, they will need to report this and then pay the tax they owe.
Thankfully, the Government’s official website contains a full level of guidance on the matter, including newly introduced rules since 2020.
[ad_2]
Source link
