Rishi Sunak insists UK will not return to austerity
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Wealth taxes have long been the subject of speculation, with various reports since March’s Budget indicating that Chancellor of the Exchequer Rishi Sunak could change them. His Government’s controversial National Insurance hike, which looks set to be laid out this week, has been roundly criticised for being unfair on younger people. As a result, pressure is now building on Labour Party leader Keir Starmer to push for taxes on the wealthiest as an alternative.
The Mayor of Greater Manchester, Andy Burnham, said last week: “The fairest way of providing social care is on NHS terms through a national care service, and the fairest way of raising the funding to pay for it is by taxing wealth, not work.
“The Government should be looking at reforming taxes and reliefs on assets, land, pensions, property and excessive earnings and profits before hitting younger, low-paid workers with the bill.”
This could mean capital gains tax and inheritance tax, which had already been in Mr Sunak’s sights for reforms, are increasingly vulnerable to changes.
In November last year, the Office for Tax Simplification (OTS) was asked by the Chancellor to set out proposals on how to raise funds amid the pandemic.
To the fury of many Tory MPs, they pointed to wealth taxes as a way to raise funds, suggesting capital gains tax could be aligned with income tax.
Capital gains tax news: Sunak could reform wealth taxes (Image: getty)
Capital gains tax news: Sunak commissioned the OTS report (Image: getty)
Laith Khalaf, financial analyst at AJ Bell, warned: “Investors, entrepreneurs and buy-to-let landlords should all now be on high alert.
“The OTS has teed the Chancellor up to boost Treasury revenues by raising capital gains tax.”
But former Brexit Minister, David Davis, was not pleased with the prospect of the Government using wealth taxes as a way to raise more cash.
He said: “The total focus of the Treasury should be on driving the economic recovery. In such circumstances, tax increases like these amount to economic self-harm.
“The Treasury would have to be pathologically stupid to implement such nonsense.
“What we need now is more saving, more investment, more wealth creation and more job creation. This deeply un-Conservative policy would undermine all of these things.”
Capital gains tax news: The UK Treasury (Image: getty)
Tory backbencher and former Cabinet minister John Redwood added: “It’s an extremely good way of lowering the take from capital gains tax and slowing the economy.
“It’s a very old chestnut and all Chancellors have discovered that you need to set it at a low enough rate for people to take gains and pay it.
“Because people don’t have to pay it; they can sit in a house they don’t really like very much instead of moving, or hold assets they don’t really want very much but they don’t want to pay tax (either).
“I have no idea what they are going to do but I think the mood at the moment is we don’t want tax rises.
“If anything, we want tax cuts because we want growth. So I don’t think this is particularly welcome today.”
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Capital gains tax news: Landlord and investors were told to be on ‘high alert’ (Image: getty)
Capital gains tax news: HMRC raked in record levels of CGT last year (Image: getty)
Capital gains tax is currently charged at two rates. It carries a 10 percent levy in the lower rate band and 20 percent in the higher rate band.
However, if it were to be aligned with income tax, people could be charged anywhere between 20-45 percent.
As the Government considers ways to reform wealth taxes, capital gains tax is already expected to bring in more cash over the next few years.
In the 2019-2020 tax year, HM Revenue & Customs collected record amounts of capital gains tax as experts predicted this figure would continue to rise.
A figure of £9.9billion was paid by those hit by the levy, representing a rise of three percent – but this rise came despite the number of people paying capital gains tax decreasing by six percent.
In 2019-20, 41 percent of capital gains tax came from those who made gains of £5million or more – a group which represents less than one percent of levy’s taxpayers.