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Capital Gains Tax rate set to double and tax free annual exemptions to be cut

The remit of the review was, “to 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,” which, coupled with the role of the OTS, namely, “we give independent advice to the government on simplifying the UK tax system, to make things easier for taxpayers,” ought to have kept this report well away from the design of tax policy.

But the report has a different feel to past OTS reports, from its content and presentation, via it having hit the BBC news headlines page immediately upon publication, and to the release note carried on its website, “this new report highlights ways Capital Gains Tax can distort behaviour, and sets out a framework of policy choice about the design of the tax for government”.

A few of the headline recommendations of the report include:

  • cutting the tax free ‘annual exemption’ from £12,300 to perhaps somewhere in the £2,000 - £4,000 range
  • increasing rates of Capital Gains Tax to be aligned with income tax rates
  • removing the current Capital Gains Tax ‘clean slate’ treatment on death, potentially exposing assets to double tax through both Inheritance Tax and Capital Gains Tax
  • abolishing BADR (Entrepreneurs’ Relief as was) in favour of a much more restricted retirement relief.

We consider this to be the first shot across the bows of the tax increases which most commentators anticipate will be necessary to pay for the various COVID support measures deployed by the Government. If the recommendations are adopted, it could be the most radical change to our approach to capital taxes since the early 1980s.

In light of that, we have prepared a document detailing the 11 recommendations of the report and offering our UHY view on what those are likely to mean for taxpayers and what those taxpayers ought to be considering in the next handful of months.

We’ve also put together a dedicated rural version of this guidance here.

Webinar: 'Capital Gains Tax Reform: What does this mean for taxpayers?'

Join us for our latest webinar, 'Capital Gains Tax Reform: What does this mean for taxpayers?' on Thursday 19 November from 10-10:30am. 

The webinar will be covering:

  • impact CGT reform will have on succession planning
  • share-based rewards and accumulated retained earnings
  • annual exemptions & Business Asset Disposal Relief (BADR, formerly known as Entrepreneurs' Relief)
  • potential Inheritance Tax (IHT) changes.

Register here.

Webinar: Capital gains tax reform threatening the future of the family farm

Join us for our agricultural webinar on Thursday 19 November from 9-9:30am. 

The webinar will be covering:

- Impact CGT reform will have on succession planning.

- Annual exemptions & Business Asset Disposal Relief (BADR).

- Potential Inheritance Tax (IHT) changes.

There will also be an opportunity to ask our experts questions during a live Q&A session.

Register here

The next step

To find out more about the report and how it may affect you, please contact Graham Boar or your usual UHY adviser. 

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