Readers will have seen it reported in the press that the Chancellor of the Exchequer has asked the Office of Tax Simplification (‘OTS’) to undertake a review of Capital Gains Tax (‘CGT’). The brief requests that the OTS concentrate in particular on ‘the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.’
Does this mean that capital gains (which are currently taxed at between 0% and 28% depending on circumstances) will in future be taxed more heavily? Well, with the government’s deficit for the 2020/21 financial year currently expected to reach nearly £300bn and the national debt at more than 100% of Gross Domestic Product, it would be irrationally optimistic to bet against it.
Whatever happens, nothing will change immediately: the OTS will be collecting evidence of one sort or another until 12 October, so our guess would be that a report would appear towards the end of 2020 and that any changes would be effective no earlier than the start of the next tax year on 6 April 2021.
Meanwhile, what’s our advice?
The bad news is that it is in our view a racing certainty either that rates of CGT will increase or reliefs will be reduced – or both. It’s particularly worth noting that last year’s OTS report on ‘Simplifying the design of Inheritance Tax’ (on which we commented here) suggested that the universal ‘rebasing’ of assets for CGT purposes on death was anomalous and might logically be restricted to assets on which an actual charge to IHT arose. That alone would be a significant change materially affecting much estate planning.
The good news is that there will probably be at least eight months or so to plan: but that should not be taken as a recommendation to leave things to the last minute. Asset values are in many cases somewhat depressed at the moment. That may make it a bad time to make a ‘real’ disposal to an unconnected purchaser: but it may, as we have said before, make it a good time to rearrange family finances and incidentally to crystallize latent capital gains at today’s relatively benign rates.
Don’t act in haste: but do consider the possibility of acting with circumspection.
For more information, please get in touch with your usual BKL contact or use our enquiry form.
Above all, stay safe and well.
