Investors, homeowners and second home owners face another tax raid next week as Chancellor Jeremy Hunt plots to cut capital gains tax allowance to £6,000
- Jeremy Hunt wants to boost revenue from the current £10billion a year
- The Office for Tax Simplification says aligning CGT with income tax could bring in £14billion
- Currently, higher rate taxpayers pay 20% on stocks and 28% on second homes
- Now the non-taxable allowance of £12,300 is set to be halved to just over £6,000
Investors, landlords and owners of second homes will face another tax raid next week under capital gains tax reform plans.
Chancellor Jeremy Hunt wants a major overhaul of the tax to raise revenue from the current £10billion a year.
Whitehall sources have said the £12,300 tax-free allowance is set to be halved to over £6,000 – leading to tens of thousands of people paying the tax for the first time.
Mr Hunt is also seeking to increase the rate of tax paid on gains made above the threshold.
Currently, higher rate taxpayers pay a rate of 20% on assets such as stocks and 28% on residential property such as second homes.
Chancellor Jeremy Hunt wants to shake up taxes to boost revenue. Whitehall sources have said the £12,300 tax-free allowance is set to be halved to over £6,000 – leading to tens of thousands of people paying the tax for the first time.
Basic rate taxpayers pay 10% on investments and 18% on residential properties. Capital gains tax (CGT) is levied on the capital gain of a property.
For example, a higher rate taxpayer making a net gain of £100,000 on a second home would pay £24,556 in CGT.
Treasury officials have drawn up options for raising each of the rates, but ministers have yet to decide how far they should go.
About 300,000 people a year currently pay the tax. The CGT has long been the target of Labor who wonder why it is levied at a lower rate than income tax.
A report by the Office for Tax Simplification in 2020 said aligning CGT with income tax rates could bring in £14billion, but warned the actual income generated would be lower as individuals change their behavior to avoid paying it.
Critics including Jacob Rees-Mogg have warned of increased tax risks of owners leaving the market and hurting the wider economy. Investors are already facing a dividend tax hike in the November 17 budget and families are also facing a squeeze on inheritance tax.
Jacob Rees-Mogg said increased tax risks are forcing owners out of the market and hurting the wider economy