Capital Gains Tax Reforms
- 18th November 2020
CGT and the OTS
If you aren’t very familiar with the first three letters, then very shortly the last three letters might change that. The Office for Tax Simplification (OTS) has completed its advisory report to the Government on an overhaul of the Capital Gains Tax (CGT) regime and if any of its recommendations are taken up, it’s likely that more of us could be paying more in tax.
We’re all aware that the ongoing COVID-19 pandemic is causing Government debt to build up; the cost of the pandemic currently sits at £190 billion and it’s clear that the end bill - however much that turns out to be - will need to be paid for somehow.
Back in July the Government asked the OTS to report on the possible effects of changes to the CGT rules. Four months later and its 135-page report contains a number of possible solutions, including:
- Reducing the annual exemption down from £12,300; halving the current exemption would increase the number of CGT payers by over 200,000.
- Bringing CGT rates in line with income tax rates; this is certainly simplification but it would also mean CGT rates doubling to at least 20%.
- Scrapping the uplift on death; this would mean the value of a legacy could be reduced, although careful consideration is needed as to how this would interact with inheritance tax.
None of this is set in stone and it is likely that the end result will be a blend of different ideas, but it is hard to see anything other than an increase on the 265,000 people who currently pay CGT each year. How big that increase is will depend on the severity of any changes and how quickly they are enacted.
Like many taxes, professional financial planning will make a significant difference to the impact that any CGT changes have on your own personal situation. There are a number of strategies available today that can serve to protect your assets; now more than ever it is important to take stock and prepare for the future.
The information and opinions expressed herein are the views of Forrester Boyd Wealth Management and are based on current public information we believe to be reliable but we do not represent that they are accurate or complete and should not be relied upon as such.
Please contact Forrester Boyd Wealth Management for individual guidance and advice on how any alteration in CGT may affect you in your specific circumstances.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.