HMRC released tax statistics in early August showing that for the 2019 fiscal year through 2020, the total CGT liability for 265,000 CGT taxpayers was £ 9.9 billion, realized with profits of £ 65.8 billion. Rishi Sunak has taken steps to limit CGT costs in the past few months, but these efforts can have unforeseen effects.
In the Chancellor’s March budget, Sunak froze the CGT’s annual allowance, which is currently £ 12,300.
However, analyzing this month’s statistics, Richard Jameson, a partner on the Private Wealth team at Saffery Champness, found that the lockdown has likely forced many taxpayers to make hasty decisions.
“These statistics can mark a turning point for the UK capital gains tax system in more ways than one,” he said.
“First, the fact that in the current economic context, if government spending left a huge public finances void during the pandemic that ultimately needs to be filled, annual CGT revenues increased by a modest three percent, half, in 2019-20 are as much as last year.
READ MORE: This woman increased her state pension by £ 1,600 a year
“This could fuel calls for a more drastic approach to taxing capital assets – such as aligning CGT rates with income tax rates as recommended by the OTS in November, or in the form of a one-off wealth tax introduced by The. The Wealth Tax Commission was recommended in December.
“But beyond that, the statistics potentially offer a glimpse into the future of the CGT regime, not to mention other taxes, in the figures for the new 30-day reporting service for CGT property sales, which was introduced in April 2020.
“The 75,000 taxpayers who have signed, sealed and submitted over 80,000 tax returns to HMRC to report over £ 1 billion in CGT liabilities may seem like a promising start to the new system, but there were significant teething troubles behind those numbers. those highlighted in the OTS’s second CGT report in May, which recommended the remedial action to double the 30-day reporting window to reduce the administrative burden for people going through the complex process of selling property.
“Nonetheless, real-time reports and shorter deadlines for paying taxes are the clear direction, as HMRC believes this provides significant benefits in overcoming the tax gap and submitting tax revenue, and asset owners need careful bookkeeping to keep up with the new To meet reporting requirements.
DO NOT MISS:
“Save Hundreds of Pounds In One Month”: Savings Trick [EXPERT]
Universal Credit: MPs urge Rishi Sunak to extend payment increase [INSIGHT]
Rishi Sunak must fill the pension gap “once and for all” [EXPERT]
“The statistics also show record amounts of profits drawn on Entrepreneurs’ Relief, which likely reflects the Chancellor’s decision in the March 2020 budget to reduce the lifetime grant from £ 10 million to £ 1 million in profits, which individuals do causes business assets to expedite disposals to get them over the line in the month prior to the changes taking effect.
“Signaling this likely change in relief before the budget could also have resulted in an increase in overall tax revenue on chargeable profits.”
While CGT is typically charged on investment gains, there are a number of other assets that it could be charged to, including:
- Most personal possessions are worth £ 6,000 or more, apart from a car
- Property that is not an individual’s primary residence
- A person’s primary residence, if they rent it out, use it for business, or if it is very large
- Business assets
While Mr Sunak froze CGT and other taxes earlier in the year, an autumn budget is due in the coming months and many fear that some tough decisions will need to be made.
Julia Rosenbloom, Tax Partner at Smith & Williamson, commented: “As the government continues to find new ways to pay for its response to the pandemic, the Treasury Department will focus in the coming months on studying how it will continue its revenue can increase profits from tax revenues.
“Since the weekend there have been increasing rumors of a plan by the Chancellor to launch a pension tax raid on an autumn budget. If it is confirmed that a budget will be run this year, then lucrative reforms would not be inconceivable for other taxes, particularly IHT and CGT, to be taken into account as they are levied annually for the Treasury.
“The announcement in this year’s spring budget that both the zero rate and the zero rate for residences are to be frozen until at least April 2026 will already mean that many families will pay higher IHT bills, as more discounts will be brought into the scope due to increasing real estate and share prices.
“If the Chancellor sledges the tax system on an autumn budget and explicitly increases IHT fees, a lot more people will be affected – and some may have to go to the point of selling single-family homes to pay their IHT bills. The clock is ticking. “So that families can make the most of their current benefits before possible new reforms are introduced.”