Capital gains tax: Rishi Sunak increasing rate of wealth levy ‘likely’ in tax raid warning

Laura Kuenssberg grills Rishi Sunak on taxation rise

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

The Government’s recent National Insurance increase, which was announced last week, has sparked fear that other taxes could be raised. Treasury officials have admitted this week that council tax may have to rise as some fear spending needed to pay staff with higher employer national insurance contributions, at a reported cost of £2billion. Cat Little, the Treasury’s chief of public spending, said she “cannot confirm” whether local authorities would get compensation if it were needed to stop them hiking council tax.

But there has also been speculation over whether wealth taxes could be targeted by the Government after figures in the LabourParty suggested they would be a fairer way to pay for health and social care reforms.

Figures from the Treasury released last month show that its capital gains tax receipts hit £9.8billion in the 2019/20 tax year, up four-fold from the £2.5billion achieved a decade ago.

Shaun Moore, tax and financial planning expert at Quilter, believes this trend will continue.

He told Estate Agent Today: “This is likely to just be the start of record years for the amount brought in by capital gains tax and preliminary data from the Office for National Statistics is already showing this will be the case.”

Mr Moore says that some people may feel the need to dispose of their assets now to avoid future bills, and believes the capital gains tax rate could be increased.

He continued: “Clearly with asset prices rising and frozen or decreasing allowances, more people will ultimately be brought into scope to pay capital gains tax, and as such it is a good idea to plan your disposals thoroughly and ensure they are done in the most tax-effective way” he adds.

And he cautions: “The amount paid in capital gains tax dwarfs what is brought in by inheritance tax and as such will be considered a more attractive tax to raise for the Treasury.

The fact that 41 percent of capital gains tax came from those who made gains of £5million or more suggests an increase in rates is far more likely than any other policy tweak, particularly given the government’s triple tax promise not to raise VAT, income tax and national insurance puts the Treasury in somewhat of a bind.”

Last November, a report by the Office of Tax Simplification recommended aligning capital gains tax with income tax.

The wealth levy is currently paid at 18 percent on residential property and 10 percent on other assets in the lower rate band.

In the higher rate band, they pay 28 percent on property and 20 percent on other assets.

Aligning it with income tax could see people pay as much as 45 percent.

Analyst at AJ Bell, Tom Selby, told Express.co.uk last month that it is “very possible” capital gains tax will be aligned with income tax.

Mr Selby 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.”

DON’T MISS
Inheritance tax hike inevitable Rishi Sunak told: ‘It’s arithmetic’ [INSIGHT]
State pension: Savers set for four percent rise amid ‘steep’ inflation [ANALYSIS]
Capital gains tax rate could be moved to 45 percent: ‘Possible!’ [INSIGHT]

But economist at the free market Institute of Economic Affiars, Julian Jessop, believes the tax is a “triple taxation”.

He said: “The whole problem with inheritance tax and capital gains tax is a lot of them are running into the risk of being double or triple taxation.

“This is investments built up on the back of income that people have already paid tax on, so I think you should tax income not capital otherwise you discourage people from saving and investing.

“It’s another good example of how there isn’t an easy win here, if you want to get more money out of the economy it really needs to be based on income rather than wealth or anything else.”

Source: Read Full Article