Rishi Sunak’s capital gains tax review may usher in higher taxes on wealthy | Money

Rishi Sunak’s capital gains tax review may usher in higher taxes on wealthy | Money

A review of capital gains tax ordered by the chancellor could open the door to higher taxes for the wealthy, analysts have said.

Rishi Sunak said on Tuesday that he wanted the Office for Tax Simplification (OTS) to examine the way people who sell second homes, works of art and stocks and shares can escape paying tax on their gains.

Sunak said he also wanted the OTS, set up by George Osborne as an adviser to the Treasury, to report on how CGT rates compare with other taxes and how “the present rules can distort behaviour”.

Tom Selby, senior analyst at the financial adviser AJ Bell, said: “With UK borrowing set to hit its highest level in peacetime history, Sunak’s request for a review of CGT feels like the starting pistol for a tax grab ahead of the Autumn budget later this year.”

Sunak is known to be concerned that households are able to drive down their CGT tax bills using a variety of avoidance measures. While the top rate of income tax is 45% and 40% for earners over £50,000, Selby said the average CGT paid on the sale of assets was 15%.

A shift to align CGT and income tax rates, which would be supported by Labour, could simplify the system and raise tax revenue – “particularly if the annual exempt amount, currently set at £12,300, is either slashed or abolished altogether”, Selby said.

The Treasury said: “This is standard internal working. There is no expectation or plans for policy changes as a result.”

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Last year, the OTS put forward plans to streamline inheritance tax rules to limit the number of exemptions. It kept in place current generous tax thresholds, which allow up to £1m to be passed on tax free. The report has yet to be acted on.

The chancellor said: “This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.”

He added: “In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”

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