THE BUDGET: An individual's perspective
As predicted, we did not see a hike in Capital Gains Tax (‘CGT’) rates in Wednesday’s Budget. Nor did we see an overhaul of Inheritance Tax (‘IHT’). Instead, the focus was on Covid-related support (extension of furlough, minimum wage increase etc); an extension to the SDLT holiday; and financial support for various sectors such as the arts, sport, and other business investment and incentives. Whilst the chancellor announced a Corporation Tax hike (from 19% to 25%) this will come into effect in April 2023.
Of course, this does not mean we will not see an increase in the CGT rates in the next couple of years – in fact, it’s pretty likely we will – however for now we have a little more time in which to plan for the likely changes. Those changes could include the CGT rates being brought in line with income tax rates and also losing the CGT base cost uplift on death (see our previous article following the Office of Tax Simplification’s 2020 Report.)
For many of our clients, some of that planning includes making lifetime gifts of assets laden with capital gain and consequently paying a lower tax rate than the death rate for inheritance tax, however careful consideration needs to be made of the potential for those disposals also being subject to IHT if the donor dies within 7 years of the gift; as well as the potential for loss of reliefs such as Business Property Relief.
Interestingly, HMRC’s tax receipts data for February show higher CGT receipts than ever – suggesting, perhaps, that clients are realising gains in anticipation of increased rates.
Many of the issues raised in the OTS Report (Office of Tax Simplification – Report in November 2020) will receive greater attention when the pandemic loses traction and the government is able to shift focus to economic recovery and raising public funds.
Get in touch
If you’d like to find out more about this update, or if you need any advice on estate planning please get in touch with Georgina Sinha.
All information in this update is accurate at the time of writing. It is meant for general information only and is not legal advice.