CGT changes could be on the horizon – are you prepared?

With the Institute for Fiscal Studies (IFS) having declared tax rises of more than £40 billion a year to be “all but inevitable” following the pandemic and the Chancellor having already ordered a review into Capital Gain Tax (CGT), it looks increasingly likely that CGT will feature in a coming Budget.

At the moment, CGT, which is applied to the profits made from the sale of most classes of assets by individuals and trusts, offers an annual exemption of £12,300 for individuals and £6,150 for settlors selling through most forms of trust.

Basic rate taxpayers pay CGT at 10 per cent on most classes of assets and 18 per cent on residential property other than primary residences.

Meanwhile, higher-rate taxpayers pay CGT at 20 per cent on most classes of assets and 28 per cent on residential property other than primary residences.

Because these rates are so much lower than income tax, CGT can play an important role in tax planning and it is important that your tax planning takes account of the risk of substantial changes to CGT and the associated reliefs and allowances.

Preparing effectively for the prospect of CGT reforms requires an early assessment of your tax exposure as a whole, coupled with an assessment of whether you should bring forward the disposal of key assets or transfer them into your pension scheme, for instance.

Our team of specialists can provide tax planning advice tailored to your needs as we enter a period of potentially several years of tax rises.

Please contact us today for tax planning advice.

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