Capital Gains Tax threat to homes put on back burner
CGT reform has long been mooted by the government’s own Office of Tax Simplification and announcements were expected in the Spring Budget, or later this year.
However, now Chancellor Rishi Sunak is reported to have dismissed the possibility of CGT increases as potentially too unpopular.
The government faces the huge cost of extravagant spending commitments over COVID 19, G7 climate change pledges, new social care policies and even a £200m Royal Yacht.
But The Times says Sunak has “ruled out a long expected increase in Capital Gains Tax on the grounds that it does not raise enough money to justify the political pain of introducing it, not least from [Conservative party] donors.”
In the spring a report commissioned by the government called for the doubling of Capital Gains Tax on profits from the sale of second homes including buy to lets.
The Office for Tax Simplification, set up by the government, said £14 billion could be raised by cutting exemptions and doubling rates.
If Sunak acted on the recommendation it is thought that basic rate taxpayers would be largely unaffected, but would still see their CGT tax bills rise from 18 to 20 per cent.
But higher rate taxpayers selling buy to let or second homes would see their CGT bills soar from 28 to 40 per cent, an increase that would amount to tens of thousands of pounds for many landlords in particular.
The OTS also wanted a major reduction in the Annual Tax Allowance, which currently sits at £12,300 but could be lowered to only £2,000.
The Times says the most likely target for raising money would be pensioners.
Treasury officials are examining plans to suspend the so-called ‘triple lock’ on pensions, saving £4 billion annually. Sunak’s department is also reported to be considering taxes for online businesses and gambling services.