Chancellor to consider increases to capital gains tax
23rd November 2020
Chancellor Rishi Sunak is considering changes to capital gains tax (CGT) rates following recommendations from the Office of Tax Simplification (OTS).
The OTS was asked to review the system earlier this year and has now published a report containing 11 recommendations for the government to implement.
One of the OTS’ main suggestions is to bring CGT in line with income tax, which would mean a larger bill for those on a higher tax band.
For landlords with a high income, this could mean a rise of 61% paid in tax in a year.
Estate agents Hamptons International have looked at the average equity held by a landlord on a property of £69,000 and found that the proposed changes would result in an extra £6,800 for higher rate taxpayers.
For basic rate taxpayers it would mean an extra £1,130.
However, if the OTS’ other recommendation of reducing the CGT exemption threshold from £12,300 to £5,000 is implemented, a higher rate landlord’s tax bill could end up at £25,600 a year.
“There is no doubt that Sunak is going to execute some kind of tax raid in his next budget,” said Mitch Young, co-founder of tax consultancy firm Fusion.
“Landlords need to get their houses in order before this happens next Spring.”
CGT is only paid on sold assets when it has increased in value since purchase. This means that landlords would only pay increased tax in a year where they have sold their property.