Spring Budget – will we see changes made to Capital Gains Tax?
We are less than a week away from the first budget of 2021, there are many predictions of what the Chancellor of the Exchequer, Rishi Sunak has in store. Following the reports from the Office of Budget Responsibility (OBR) that government borrowing is estimated to reach £394bn for the current tax year (compared to the expected borrowing of £55bn for the year), it wouldn't come as a surprise if the Budget sets out plans to balance the country's budget and increase taxes.
One of the areas which has generated much speculation is Capital Gains Tax (CGT) and there have been a number of measures which are predicted to appear in the spring Budget, to include:
- Reducing the annual gains allowance from £12,300 to possibly £2,000 but with fewer assets attracting the charge;
- Aligning the rate of CGT to income tax levels, meaning that an additional rate taxpayer would pay CGT at a rate of 45% rather than the current rate of 28%;
- Removal of the CGT uplift on death whereby capital assets are rebased to the date of death value.
It is important that the impact of increasing the rate of CGT or the number of those caught under the CGT net is considered, especially when looking at gains on the sale of a second property. When faced with a significant CGT liability, there is little incentive to sell a second property which will not only reduce the availability of properties on the market for first time buyers but will also reduce the amount of Stamp Duty Land Tax paid.
Given the current climate as a result of the global pandemic, it has been suggested that any tax rises will not be implemented immediately due to the financial difficulties so many people are facing which is resulting in many having to sell capital assets to survive whilst their income has been completely or dramatically reduced.
As always it is difficult to predict the content of the Budget announcement but we would speculate that any changes are unlikely to be implemented immediately.