Act now to avoid potential tax-raid repercussions from the Treasury Department.
As chancellor Rishi Sunak looks for methods to pay his Covid rescues, experts are advising everyone who is expected to make a financial gain to plan ahead of a potential Treasury tax raid.
HM Revenue & Customs currently earns almost £10 billion a year from capital gains tax (CGT), nearly double the amount it earns from inheritance tax, but far too many people are unaware of the dangers this “forgotten” tax poses.
CGT receipts for the Treasury reached £9.8 billion in the 2019/20 tax year, up from £2.5 billion a decade before.
They’re set to climb even more after the Chancellor frozen the annual CGT allowance at £12,300 until 2026 in his March Budget, a move that will pull many more individuals into the net, with worse to come.
Sunak may raise CGT rates in his Autumn Statement or March 2022 Budget, according to tax experts, so savers and investors who are likely to make a capital gain should start planning ahead of time to reduce their risk.
According to Alan Harvey, a financial advisor at investment company Brewin Dolphin, the government is expected to raise CGT when, not if. He said, “Clients are already calling us to help them understand the potential impact.”
When you sell assets at a profit, such as shares and other investments held outside of a tax-free Isa, as well as artworks, antiques, and jewelry, and property outside than your primary residence, you could face a CGT payment.
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CGT is now levied at 10% for basic rate taxes and 20% for higher-rate taxpayers.
When selling an investment property or a second home, some will be subject to a higher CGT rate of 10% and 28%, respectively.
Many believe Sunak would align CGT rates with income tax rates, thus subjecting certain taxpayers to a 40 or 45 percent penalty.
“Some customers are happy to pay CGT on property or investment sales now rather than in a year or two, when rates are anticipated to be higher,” Harvey said, adding that taking action now might save thousands in the future.
Spreading your CGT costs over two or three taxes can help you save money by allowing you to take advantage of your £12,300 annual exemption.
Tilney Investment Management Services is led by Tilney Investment Management Services’ managing director. “Brinkwire News in Condensed Form.”