Rishi Sunak insists UK will not return to austerity
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In the last tax year of 2019-2020, HM Revenue & Customs collected record amounts of capital gains tax as experts predicted this figure would continue to rise. The Government collected £9.9billion from the wealth levy last tax year, representing a rise of three percent. This came despite the number of people actually paying the tax decreasing – this figure fell by six percent to 265,000.
Most capital gains tax comes from a small number of taxpayers who make large gains.
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.
But on the FT Adviser podcast in July, Bill Dodwell of the Office of Tax Simplification warned that many are still finding ways to avoid paying both inheritance tax and wealth tax.
He said: “One of the questions for the tax system is how neutral should it be? At the moment there is a sort of penalty against an individual giving assets away during their lifetime to children for example, because in many cases that can trigger a capital gains tax liability.
Rishi Sunak news: Sunak could hike CGT (Image: getty)
Rishi Sunak news: The UK Treasury (Image: getty)
“So many people in that circumstance hang onto the asset until they die, then they are inherited by their descendants at the market value for capital gains tax at date of death rather than at their original cost.
“In some cases that can lead to a double advantage, particularly where you are dealing with business assets, you can end up paying no inheritance tax because of the exemption there.
“And the recipient gets that market value base cost, so they can immediately sell the asset if they choose and essentially pay no tax whatsoever.
“We drew attention to that because that seems to conflict with the policy aim, which is to allow assets to pass from one generation to the other and continue to be held, not immediately sold.”
Rishi Sunak news: HMRC raked in more last year (Image: getty)
The Office of Tax Simplification published a report in November, commissioned by the Chancellor, that suggested wealth taxes including capital gains could be used to recoup funds.
Mr Dodwell himself suggested following the publishing of that report that capital gains could be aligned with income tax.
He said: “If the government considers the simplification priority is to reduce distortions to behaviour, it should consider either more closely aligning capital gains tax rates with income tax rates, or addressing boundary issues as between capital gains tax and income tax.
“The report covers a range of other issues relevant to each policy choice, including relief for inflation.”
Analyst at AJ Bell, Tom Selby, told Express.co.uk earlier this month that it is “very possible” capital gains tax will be aligned with income tax.
He added: “The Office for Tax Simplification’s proposals edged towards aligning the two taxes.
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Rishi Sunak news: Many have avoided paying wealth taxes (Image: getty)
Rishi Sunak news: Information on ISAs (Image: getty)
“The impact of that would be someone disposing of an asset would pay significantly more tax than they do at the moment.
“There would be a big impact on landlords for example, people who have second properties.
“At the moment capital gains tax is charged at 10 percent or 20 percent depending on whether you are a lower rate or higher rate taxpayer.
“If this was aligned with income tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent.
“So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”