It has been forecasted that the government will need to find up to £40 billion a year to recover from the mass deficit created by the unprecedented levels of government spending during the ongoing pandemic. Inevitably, the recuperation of £40 billion a year will derive from substantial cuts or additional revenue; and possibly various forms of tax changes introduced by Rishi Sunak in the upcoming Budget due March 2021 – with a potential target being Capital Gains Tax. Following a request from the Chancellor, Rishi Sunak, the Office of Tax Simplifications (OTS) published its first report, on 11th November, into the review of capital gains tax (CGT). The main recommendations from the OTS are:
- Aligning CGT rates with income tax.
- Lower the annual exemption on CGT
- Taxing share incentives as income rather than capital gains
- Removal of the uplift to market value on assets inherited on death relief
- Reducing or eliminating entrepreneurs’ relief/business asset disposal relief.
It would be wise for investors, private equity executives and owner-directors (amongst others) as well as anyone else holding assets standing at a significant gain, to take the contents of the report into consideration and take advice on their options over the next few months.