Rishi Sunak orders review into UK capital gains tax
Chancellor Rishi Sunak has commissioned a report into capital gains taxes, which could lead to the government increasing the tax burden to help pay for its coronavirus spending.
Sunak has asked the Office of Tax Simplification to conduct the review, with the body launching a survey today asking for “evidence to seek views about capital gains tax”.
The survey has prompted suggestions that the Treasury is looking at raising capital gains taxes in an effort to offset its £350bn deficit this year caused by emergency coronavirus spending.
This includes £30bn of spending announced by the chancellor last week, which included a £2bn jobs programme, a £3bn green energy programme and a potential £9bn spend on giving money to companies that bring back furloughed employees.
The UK’s current swathe of capital gains tax exemptions could be the focus of any tax rises to help pay for this spending.
Anyone who sells their main residence is exempt from paying capital gains tax, however this could be up for the chop.
The tax-free allowance of £12,300 could also be reduced in an attempt to raise more revenue.
Nathan Long, senior analyst at Hargreaves Lansdown, said the review looked like a “tax claw back” from Sunak.
“We could be seeing the tips of the government’s fingernails, as it considers how to claw back the enormous sums spent on bailing the economy out of the Covid19 crisis,” he said.
“Capital gains tax currently doesn’t take account of how long people have held an investment, but it should. It also leaves investors semi-trapped in investments to avoid incurring a tax penalty. In the case of those with a second property they want to sell, this doesn’t really promote sale of housing stock to first time buyers.
“But it would be naïve to assume the chancellor didn’t have his eye on tweaking taxes to refill his coffers.”
Steven Cameron, pension director at financial services firm Aegon, added: “The review of capital gains tax being undertaken by the Office of Tax Simplification at the request of the chancellor is the biggest hint yet that a review of wealth taxes may be part of plans to get the nation’s finances back on a sounder footing.
“It’s often the case that increases in wealth are taxed at a lower rate than income and this looks to be part of the Office of Tax Simplification deliberations.”