Rishi Sunak tax reform: Will Joe Biden's CGT plans force the Chancellor to 'follow suit'?

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HMRC recently released tax receipts for the 2020/21 tax year and within this data, it was shown the Government collected £10.61billion in CGT, an increase from £9.82billion in 2019/20. Analysis of these figures detailed the amount of CGT collected by the state has risen 36.2 percent in three years and has nearly tripled over the last decade.

Last year, the Government collected more in CGT than it did in Stamp Duty (£8.7billion) for the first time since 2008/09.

Three years ago, Stamp Duty was worth £5billion more to HMRC than CGT and as President Joe Biden eyes up increases to CGT in America, NFU Mutual warned the Chancellor could follow suit as CGT becomes more prominent on the Treasury’s books.

Sean McCann, a Chartered Financial Planner at NFU Mutual, commented on this: “Capital Gains Tax is paid when investors realise gains on shares or properties that aren’t their main residence.

“Property prices have rocketed, in part due to the stamp duty holiday, and this has likely contributed to the increase in CGT the government has collected as some second property and buy to let owners have sold up.

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Sean went on to break down what consumers should look out for in regards to CGT

Watch out for gifting

Sean pointed out many people are unaware that CGT is payable on gifts, which could be made worse by inheritance tax considerations: “There are a number of traps with CGT that people unwittingly fall into.

“Most notably, few people realise giving away property, shares, or other investments can trigger a tax bill.

“For example, if a parent gives property or a portfolio of shares to their children, that’s deemed to be a disposal and could be liable for Capital Gains Tax.

“It’s also possible the gift could be hit with a subsequent Inheritance Tax bill if the person making the gift dies within seven years.”

Sean concluded by examining what changes may be on the horizon for CGT in the UK: “It’s well known that CGT is in the Chancellor’s crosshairs following a review into the tax last year by the Office of Tax Simplification.

“Despite fears that rates would be aligned with Income Tax, Rishi Sunak left CGT untouched in the March Budget but this may only be a temporary reprieve.

“Across the Atlantic, President Joe Biden is reportedly considering nearly doubling the CGT rate for the wealthiest Americans from 20 percent to just under 40 percent and it will be interesting to see if Mr Sunak follows suit with his own rate increase later this year.”

Full details on CGT rules can be found on the Government’s website and impartial guidance can be sought from the likes of the Money Advice Service and Citizens Advice.

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