Capital Gains Tax reform: Government decision at last...

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02 December 2021

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Capital Gains Tax reform: Government decision at last

The long-awaited government response to calls to tighten up Capital Gains Tax has come at last - and it’s no change for the moment.

Over the past 18 months the Office of Tax Simplification made recommendations to simplify CGT, on the instruction of Chancellor Rishi Sunak.

OTS recommendations included raising CGT the rates closer to those for income tax and lowering the CGT allowance.

CGT is tax paid on the profit of the sale of any additional home - a buy to let or a holiday cottage, for example - and currently the rate of tax stands at 18 per cent for basic rate taxpayers and 28 per cent for those in the higher rate threshold. There is an annual allowance of an initial £12,300 on which no CGT would be paid.

However, the Office of Tax Simplification had called for CGT to increase in line with income tax rates to 20 per cent at the basic rate and 40 per cent at the higher rate, while also lowering the initial amount exempt to just £2,000.

But now HM Treasury, in a letter sent to the OTS and released online, appears unenthusiastic.

Lucy Frazer MP, financial secretary to the Treasury, says: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.

“The government will continue to keep the tax system under constant review to ensure it is simple and efficient. Your report is a valuable contribution to that process.”

The Treasury did accept some technical changes recommended by the OTS.

The decision came as part of the Treasury’s tax and administration day earlier this week, outlining possible changes to the tax system.

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