Private clients 3

Autumn Budget 2021: What happened to Capital Gains Tax?

Rebecca Durrant, Partner and National Head of Private Clients
27/10/2021
Private clients 3

The biggest question asked of private client advisors over the past couple of years is when do we expect Capital Gains Tax (CGT) to increase. Once again, no change to CGT rates was announced which actually came as no surprise. Asset sales have increased by around 2% to 11.5% of the tax revenue over the last 12 months, largely because of the nervousness that the Chancellor would bring CGT more in line with income tax but again this did not materialise.

This should (and perhaps is likely) to be combined with a complete overhaul of capital taxes including Inheritance Tax (IHT).

Seen as the most unfair tax only 4% of the country actually pay IHT, currently. Amongst the OECD countries the UK is one of the minority that taxes the estate of the deceased rather than the recipients. There is a perceived double tax charge with IHT in that many people feel they have been taxed already on the income they earn to buy the asset they want to pass on to loved ones. That said, given the way in which property prices in the UK particularly have rocketed, it can be difficult to balance why the wealthiest in our society should not contribute more from growth they have done little to earn, instead of increasing tax on earnings for the lower paid.

The OTS released a report on suggested reforms to IHT in 2019. One of the most radical suggestions was the removal of business relief which exempts the value of a business from IHT. This would predominately affect wealthy family business, bringing possibly the largest most valuable asset of the family into charge at a rate of 40%.

The changes suggested would be the biggest overhaul to the tax regime in years but again it seems that along with CGT, these have been shelved allowing some to breathe a sigh of relief for now.

With a general election only just over two years away at the latest, it is difficult to see how a conservative Chancellor would implement these changes any time soon. This government still wants to be seen a low tax government therefore increasing tax for the wealthy would not perhaps be a vote winner.

Autumn Budget 2021

What do the announcements mean for you and your organisation?

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Contact us

Rebecca Durrant
Rebecca Durrant
Partner, National Head of Private Clients
Manchester