Capital gains tax to be reviewed as coronavirus costs mount
Chancellor Rishi Sunak © James Veysey/Shutterstock The chancellor has ordered a review into the terms of capital gains tax (CGT), including the common reliefs farmers benefit from.
Rishi Sunak asked the Office for Tax Simplification to conduct a call for evidence and identify ways to simplify how the tax is applied on Tuesday (14 July).
The review follows a similar piece of work done last year on inheritance tax, which led to speculation that the rules on agricultural property relief were about to be tinkered with, but no changes have yet been made.
See also: Rollover relief – what is it and how does it work?
Analysts say that tax changes are likely in the medium term as the Treasury seeks to find a way to pay for government spending during the coronavirus crisis.
What is capital gains tax?
Capital gains tax is levied on the profit of an asset that has increased in value in the time between its purchase and sale, or other means of disposal.
It is normally charged on most personal possessions worth more than £6,000, property that is not a main residence, shares and business assets.
A number of business reliefs currently limit its scope, including business asset rollover relief, which can delay the payment of capital gains tax if the business uses the proceeds of the sale to invest in a new asset within three years of disposing of the old one.
Measures to tackle the virus, such as the Coronavirus Job Retention Scheme and the Self-Employment Income Support Scheme, have already cost the government £188bn since March.
The independent Office for Budget Responsibility, which scrutinises government spending, has warned up to £60bn of higher taxes or austerity would be needed to make up the deficit.
Capital gains tax is currently charged at 10% for basic-rate taxpayers and 20% for higher- and additional-rate taxpayers for gains on assets.
Last year, the Institute for Public Policy Research said raising those levels to the same rate as income tax, which is 20% at the basic rate and 40% or 45% for higher- and additional-rate taxpayers, would increase government income by £90bn over five years.
More information on the consultation is available on the Office for Tax Simplification website.