Predicting the March Budget – and the surprising significance of CGTNews
Posted by: Dental Design 30th October 2020
November’s Budget was postponed, but now we’re looking ahead to March, with the Treasury contemplating the unenviable task of trying to balance the books after the most challenging period for the economy that most of us will remember. With public spending up, also increased tax reductions and lower tax receipts due to the recession, the government will be looking at ways to raise revenue.
Pre-Covid-19, consultations had been ongoing around Inheritance Tax (IHT) and tax relief on pension contributions, with another review of business rates and Capital Gains Tax (CGT). All of these are key revenue-raising contenders, so there could be a commitment to action announced in March.
CGT – the facts might surprise you
In 2018/19, just 256,000 individuals – or less than 1% of income tax payers – made enough capital gains to face a CGT bill. Between them they paid £8.8 billion in tax, over £3.4 billion more than was collected in IHT! With CGT and IHT often being levied on the same asset (albeit at different times), that the latter was voted the UK’s most hated tax is perhaps unfair.
Of the £8.8 billion, £4.8 billion was paid by the top 5,000 CGT payers, who had gains of at least £2 million. Individuals with gains of at least £500,000 accounted for just under three-quarters of the CGT collected.
So, the amount of CGT raised from the wealthiest UK tax payers, is a significant proportion of the total. If the Chancellor increases tax rates in March, some of these individuals might decide not to realise their gains, resulting in a fall in tax collected.
If you’re one of the relatively small number of CGT tax payers, this also serves as a reminder that the current annual CGT exemption for 2020/21 of £12,300 is pretty generous. Compared to income tax, returns received as capital gains are – usually – taxed more lightly.
Robust planning and a pragmatic approach are essential, to save tax and optimise both your business and personal finances. Figurit, formerly known as Lansdell & Rose, works with a large number of business owners, businesses and individuals. As specialists who provide professional tax compliance, planning, full accountancy services and more, we look at both the detail and the bigger picture, to give advice and quality support.
For more information please visit https://figurit.com
or call Figurit (formerly known as Lansdell & Rose) on 020 7376 9333.
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