Capital gains tax warning: Rishi Sunak preparing to 'hammer' savers with hike

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One tax that could be in for big reform is capital gains tax, which is paid on your total gains each tax year. There are two rates – basic ratepayers pay 10 percent on assets and 18 percent on property. Higher ratepayers pay 20 percent on assets and 28 percent on property. But reports suggest this could be aligned with income tax, meaning the highest rate savers pay could rise to 45 percent.

In January, the Telegraph reported that Chancellor Rishi Sunak is considering the move, despite the fact the Conservative Party manifesto in 2019 committed to no increases in VAT, inheritance tax and National Insurance.

A report by the Office of Tax Simplification published on November 11, and commissioned by Mr Sunak, recommended closer alignment of income tax and capital gains tax rates.

But experts are divided on whether this is fair.

John O’Connell, chief executive of the TaxPayers’ Alliance, said: “It’s understandable when salaried workers feel they get a raw deal from the taxman, but politicians must avoid chasing favourable headlines by hammering savers and entrepreneurs.

“Capital gains tax is a double tax that harms investment, which is precisely what we should avoid if we want to kick-start growth and help create jobs.

“As we emerge from the pandemic, we should be giving families and businesses a respite from tax hikes.”

But others disagree – Chief Economist at Resolution Foundation, Jack Leslie, told Express.co.uk earlier this year that the Government should reform wealth taxes in order to raise funds.

He advocated reforms on inheritance tax as well as capital gains tax.

He said: “The Government should fix the system that it has, make it fairer, and close the loopholes.

“You could raise billions without touching the headline rates, fixing the current system is a better approach than trying to introduce a whole new wealth tax.

“One of the really big trends in the economy over the last 30 years is that the overall value of the wealth people hold is worth around twice what it was 30 years ago.

“But at the same time, taxes on wealth have stayed completely flat, so we are essentially taxing wealth half as much as we used to.

“That doesn’t seem to make much sense given we might need to find more money after this crisis, and wealthy people can probably afford to pay more.

READ MORE: State pension: Sunak could launch ‘double tax assault’

“It makes sense that the people who are less likely to have lost their jobs and face health risks, it does make sense that wealthy people should pay more in the future.”

Inheritance tax is another area in which Mr Sunak could look to make changes.

The rate of the tax is 40 percent, but it is only charged on the part of your estate that’s above the threshold of £325,000.

Meanwhile, the Government has strongly hinted that the pension triple lock could also be impacted amid concerns over a huge increase.

The triple lock guarantees that the state pension increases each year in line with the highest of the following: the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5 percent.

But with average earnings rising so much, some fear it would be unfair to make the younger generation pay for it.

Analyst at AJ Bell, Tom Selby, told Express.co.uk earlier this month that inheritance tax, capital gains tax and the state pension could all be in the firing line.

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The finance expert argued that inheritance tax is an “obvious target”.

He said: “I think everything is going to be in the Chancellor’s view as we move to the next Budget, inheritance tax is an obvious target for the Government to look at.

“Certainly the amount of people’s estate that is subject to inheritance tax has been reduced over the last few years, it has become more generous.

“While this has been a vote winner, I think in a country which is facing severe fiscal problems and with a financial hole in excess of £300billion at the moment, allowing people to inherit more tax free might be a bit too generous.

“I suspect they will look to tighten inheritance tax, although I suspect people will try to move around their assets in a way that avoids the tax in the first place.”



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