Personal Finance

Capital gains tax may more than DOUBLE in Wednesday's Budget. Take action NOW

There is growing speculation that Sunak will hike capital gains tax (CGT) in a bid to raise funds to cover Covid bailouts and plug the deficit. Tens of thousands could be in the firing line and need to act fast if CGT rises.

You may be liable for capital gains tax when selling assets at a profit, including shares and other investments held outside of a tax-free Isa.

Profits on buy-to-let or holiday properties are also liable, and on paintings, antiques and jewellery, too.

Last year, CGT generated £10.6billion for HM Revenue & Customs, up fourfold from just £2.5billion in a decade.

Nimesh Patel, tax partner at accountancy firm Grunberg & Co, is warning that Sunak may be back for more when he unveils his Autumn Budget and Spending Review on Wednesday 27 October.

Now is the time to take action to avoid a potential Budget hike, Patel said.

Currently, basic rate taxpayers pay CGT at 10 percent on annual gains above £12,300, while higher-rate taxpayers pay 20 percent.

These rise to 10 percent and 28 percent respectively, when selling an investment property or second home.

Last year, the Office for Tax Simplification (OTS) suggested aligning these rates with income tax so that basic rate tax payers would pay CGT at 20 percent on everything, while higher-rate taxpayers would pay 40 percent.

Additional rate taxpayers would pay 45 percent.

People are right to be scared of such a thumping increase, which could more than double the tax bill in some cases, Patel said.

READ MORE: Pleas for tax cut in pints from casks and kegs to help pubs recover

Use your annual exemptions. Currently, you can take £12,300 of gains a year without paying CGT. So you could spread any disposals over multiple tax years, to maximise this annual allowance.

Consider spouse transfers. Transfers between spouses and civil partners are also exempt from CGT, so a transfer to a partner would allow you to use their annual exemption too.

Offset losses against gains. You can offset capital gains against losses made in the same tax year, or even unused losses carried forward from previous tax years.

Invest in an Isa. Capital gains made on investments within an ISA are tax-free, so use your annual £20,000 allowance to protect your wealth from HM Revenue & Customs.

Check out the Enterprise Investment Scheme (EIS). This is an HMRC approved tax-efficient investment scheme that allows investors to buy company shares with CGT savings on gains.

Patel said tax planning can be complex and urged people to seek professional tax advice before taking action.


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