Chancellor Rishi Sunak has ordered a review of the Capital Gains Tax (CGT) system amid fears that he is to claw back some of the £188.7 billion the government has spent propping up the economy during the coronavirus pandemic sooner than expected.
The review by the Office for Tax Simplification (OTS) will not be good news for landlords, who are one of the key sources of CGT revenue for the government and who already pay up to 28% on gains from residential property.
One area the OTS may consider hammering include the CGT tax-free allowance that mitigate much of the impact of the tax on residential property gains, which is currently set at £12,300.
The chancellor is also likely to look closely at tax bands – depending on a property owner’s income, the level of CGT varies between 18% and 28%.
According to a report in today’s Times newspaper, Sunak is looking at whether to raise ‘historically low’ CGT rates to match equivalent income tax rates, and raise £90 billon over the next five years.
But sources at the Treasury have said the review of CGT should not be read as an automatic plan to raise levels of CGT, although The Times notes that the move ‘will prompt speculation’ ahead of the Autumn budget announcement.
A tax hike would not be a surprise – the government is scheduled to spend in total £370 billion this year, and that in order to bring spending back down to 75% of GDP, £60 billion will have to be found every decade from tax raising or spending cuts for the foreseeable future.
But landlords can have their say. The OTS has already published an online survey and a call for evidence to seek views about Capital Gains Tax.