The UK Treasury has witnessed a remarkable year for Capital Gains Tax (CGT) receipts. The data for the fiscal year 2021/2022 shows a 15% increase in gains compared to the previous year ...
Many business owners are concerned about Capital Gains Tax so are accelerating asset sales!
The number of taxpayers also surged by 20%, reflecting a significant rise in CGT liabilities and several factors contributed to this increase. In November 2020, the Office of Tax Simplification recommended aligning CGT with Income Tax rates.
"This recommendation may have prompted taxpayers to expedite disposals!"
The reduction in the lifetime limit on Business Asset Disposal Relief and the absence of relief for inflation for individual taxpayers since 2008 also played a role. Additionally, the data revealed substantial increases in gains and tax from residential property disposals, influenced by tax changes and rising interest rates in the buy-to-let market.
The future looks even more promising for CGT receipts, with additional restrictions set to come into effect. The annual exemption will sharply reduce to £6,000 this tax year and halve again to £3,000 from 2024/25 onwards, dragging more individuals into the CGT net.
Many business owners are concerned about potential tax changes, such as a possible increase in CGT rates. They are accelerating asset sales before any such changes, mindful of the lengthy process involved in disposing of large assets.
While no changes to CGT rates have been proposed, the outlook remains uncertain, especially post the next General Election. Both the Chancellor and Shadow Chancellor have expressed a desire to prioritise growth and business, but significant tax reforms, including CGT, seem off the agenda for now.
An exercise in assessing the value for money of reliefs in the tax system may guide possible changes, including adjustments to CGT reliefs. Good tax reform requires clarity of purpose, consistency across multiple electoral cycles, and measurement of impact over the medium term.
The record amounts of Capital Gains Tax in the UK reflect a complex interplay of policy decisions, market dynamics, and taxpayer behaviour. With further changes on the horizon, the landscape for CGT continues to evolve, posing both opportunities and challenges for taxpayers and policymakers alike.
"The recent shutdown of the Office of Tax Simplification adds another layer of complexity!"
As the UK navigates these uncharted waters, careful planning and strategic decision-making will be essential for both individuals and businesses looking to optimise their tax positions.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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