Sunak orders review of capital gains tax
Rishi Sunak: wants CGT to be fit for purpose
Chancellor Rishi Sunak has called for a review of capital gains tax as he looks to claw back money spent propping up businesses.
Mr Sunak, who will be grilled by MPs on the Treasury Committee today, has asked the Office for Tax Simplification to look at whether the current rates are “fit for purpose”.
It has prompted speculation that he will look to bring CGT into line with higher rates of income tax, given that it is mainly paid by those in this bracket.
The tax is levied when assets that have increased in value are sold above a key threshold.
In a letter to the OTS, Mr Sunak says: “I would like this review to identify and offer advice about opportunities to simplify the taxation of chargeable gains, to ensure the system is fit for purpose and makes the experience of those who interact with it as smooth as possible, as set out in the agreed terms of reference.”
He added: “This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.
“In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”
A Treasury source, however, said the request from the Chancellor was part of standard practice to review taxes and that it is not likely to lead to substantive changes.
Even so, it comes at a time of heightened expectations of tax rises in the autumn as Mr Sunak looks for ways to claw back at least some of the £192bn spent on measures to fight the impact of the coronavirus.
CGT rates are set at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayer, or a respective 18% and 28% where gains relate to residential property.
Tom Selby, senior analyst at AJ Bell, said Mr Sunak’s request for a review “feels like the starting pistol for a tax grab” ahead of the Autumn Budget later this year.
“Given those who pay CGT are twice as likely to pay higher rate (40%) income tax as taxpayers generally, the Treasury may have its sights set on aligning CGT rates and income tax rates,” he said.