Capital Gains Tax (CGT) often makes the headlines for the revenue it generates for HMRC. Receipts seem to reach new highs each year.
CGT is levied on gains made from the disposal of assets, if the gain exceeds your annual CGT allowance. The CGT allowance for the tax year 2020-21 is £12,300.
The amount of tax you pay will depend upon whether you are a basic rate, or higher-rate taxpayer for income tax purposes.
In the 2018-19 tax year CGT receipts totalled £9.5bn, according to latest official data. This figure is up from £8.8bn in the previous tax year.
Interestingly though, over a third of the CGT received by HM Revenue & Customs (HMRC) was paid by a group making up just 1 per cent of all CGT taxpayers – those with gains of or exceeding £5m.
Capital Gains Tax under review, upon request by Chancellor
Clearly a key stream of income for the Treasury, a critical review is now underway upon request by the Chancellor.
This evaluation follows key changes implemented earlier this year. The changes include a reduction to final period exemption for private residence relief; a new 30-day reporting rule where taxable gains are made on the disposal of UK residential property after 6 April 2020; a cut to Entrepreneurs’ Relief (ER), and the restriction of lettings relief.
Speculating about what may come of the review is all too easy. This is especially true when you consider that the government is looking to claw back some of the money spent on Coronavirus measures. It is important to remember that, at this stage, it is just that – a review.
The consultation ends on 9 November 2020. It is unlikely, however, that any changes will be implemented until 2021-22 at the earliest.
How can George Hay help?
As tax professionals and business advisers, we hope that determinations are in the interest of simplification and fairness for those liable to CGT.
We look forward to the outcomes of the OTS’ review, with interest.
Find out more about the personal tax and business tax services we provide, or contact us today to discuss your requirements in more detail.
Link: OTS Capital Gains Tax review call for evidence and survey
