Chancellor Rishi Sunak's anticipated changes to capital gains tax have been put on the back burner again, with the Treasury holding back from publishing any additional material on CGT on 'tax day'.
Financial services professionals had warned of higher rates of CGT following reviews by the Office for Tax Simplification as well as independent agencies.
Last year, Sunak commissioned a review from the OTS, which suggested a series of wide-reaching potential reforms.
The main option as suggested by the OTS was changing rates and cutting the annual exemption (currently £12,300) to between £2,000 and £4,000.
Another possible reform was to align CGT rates more closely to those of income tax.
At the time, tax advisers and financial planners said clients had started selling assets qualifying for CGT in higher volumes, in expectation of what has been branded a 'wealth tax by the back door' or a 'stealth wealth tax'.
But once again, CGT has been left off the table for now, not least - as some commentators have suggested - because of how complicated this would be to implement.
Steven Cameron, pensions director at Aegon, speaking ahead of tax day today (March 23), said: “Reform of CGT would present some complex trade-offs between different groups affected and the Chancellor may decide to formally consult on this."
Andrew Dixon, head of financial planning for Kleinwort Hambros, commented: “CGT is an obvious policy to be revisited in the Treasury’s latest review - dividends and capital gains both reflect the profits of a company but are subject to different taxes.
"That CGT remains untouched may be a relief to many business owners, but this is a direct contradiction of the proposal by the OTS.
“We also expect the interaction between IHT and CGT on death to be revisited. However, in line with most other countries the UK’s tax base is largely driven by income tax, NI and VAT.
"If the chasm in the nations finances remains taking the highest and most efficient revenue generating income streams off the table (a manifesto pledge), it must surely be reconsidered.”
Second properties
Second properties are already taxed at a higher rate (28 per cent) than most other capital gains (20 per cent currently).
One school of thought is that all gains will eventually move up to the higher rate of 28 per cent in line with second properties.
Dixon said: "Over the last few years, the tax environment for property investment has gone from being benign to unattractive, but no other asset class has quite the same allure for UK investors. Regardless of CGT rates or increases, it is hard to see UK investors giving up on property as an investment for the time being.
“Investors should continue to make use of Isa allowances and CGT allowances and view this as an annual “spring cleaning” exercise, given their 'use or lose' nature. Additionally, those whose income has now drifted into the higher rate of tax can consider a pension contribution to bring them within the basic rate band.”
