Capital gains tax fury: Sunak challenged after sellers face threat of ‘astronomical’ fines
Rishi Sunak says the government ‘can’t wave a magic wand’
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Mr Sunak is drawing up more economic changes ahead of his Autumn Budget, which is to be announced on October 27. Speaking at Conservative Party conference on Monday, Mr Sunak said he wanted to cut taxes, but that it may take some time before he is able to. He said: “Whilst I know tax rises are unpopular – some will even say un-Conservative – I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt. “Anyone who tells you that you can borrow more today and tomorrow will simply sort itself out just doesn’t care about the future.
“Yes, I want tax cuts. But in order to do that our public finances must be put back on a sustainable footing.”
One area where many will be bracing for potential changes is wealth taxes.
There has been speculation that capital gains tax may be equalised with income tax as one way to draw in funds.
However, the Chancellor is already under pressure to ease strict rules around capital gains tax, in particular to extend the reporting deadline for house sales.
The Association of Accounting Technicians (AAT) has written to the Chancellor, arguing that a period as short as 30 days to pay the levy following a residential property sale is “unreasonable”.
The organisation called for this to be extended to 60 days.
The fine for not paying capital gains tax within the 30 days is £100, but after six months this jumps to 5 percent of the gain.
AAT’s public affairs and policy head, Phill Hall, told FTAdviser last month: “This could potentially be an astronomical sum of money.”
People selling properties previously had two years to pay capital gains tax on any sales, but in April 2020, this was changed to 30 days.
Any gains could be reported in a self-assessment tax form before the change.
Mr Hall added: “Estate agents aren’t advising customers this is something they will have to do, so they’re only going to find out when they do their tax return.
“If they [sold] in April, the fine is looming over them for an entire year without them realising until their next tax return.
“It’s a particularly unpleasant situation if a customer has already spent their gains.”
Changing the deadline raised £935million for HMRC in the 2020-2021 tax year.
But Mr Hall believes the policy has made it too difficult for sellers to seek advice.
He continued: “HMRC needs to improve its guidance for estate agents.
“Accountants can’t do it for their clients. There’s a specific online account you have to set up, which takes two weeks to do.
“There’s not enough time. You’re virtually never going to be able to do it in 30 days, it’s practically impossible.”
A spokesperson from HMRC told FTAdviser: “We raise awareness of CGT reporting rules through a range of communications including webinars, social media posts, stakeholder forums, newsletters and post-Budget updates.
“To raise awareness of the payment window for property disposals we have communicated to customers and stakeholders, reached out to industry press, engaged agents, hosted webinars for landlords and shared information on Twitter and LinkedIn.
“We continue to communicate with customers and stakeholders about the policy.”
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Analyst at AJ Bell, Tom Selby, told Express.co.uk last month that it is “very possible” that capital gains tax could be aligned with income tax.
This could result in people paying a rate as high as 45 percent, he added.
The expert said: “The Office for Tax Simplification’s proposals edged towards aligning the two taxes.
“The impact of that would be someone disposing of an asset would pay significantly more tax than they do at the moment.
“There would be a big impact on landlords for example, people who have second properties.
“At the moment, capital gains tax is charged at 10 percent or 20 percent depending on whether you are a lower rate or higher rate taxpayer.
“If this was aligned with income tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent.
“So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”
Ahead of the Budget, reports have also indicated that the student loan repayment threshold could be lowered – graduates currently start repaying at £27,295 per year.
Chancellor Sunak may also announce a replacement for the £20 a week Universal Credit uplift, which was brought in in response to the pandemic but is being scrapped from today.
There could be some focus on green measures, with the COP26 climate summit being held in the UK a few days after the Budget.
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