Over the course of 2020, the Government’s support measures have been a lifeline for thousands of businesses across the UK. But with billions of pounds having been claimed through the furlough scheme alone, questions of how this substantial amount of public spending will be clawed back have been at the forefront of conversations.
A lot of noise has been focused on a potential increase in Capital Gains Tax (CGT) rates over the last few weeks. In November, the first of two commissioned OTS reports highlighted that bringing CGT in line with income tax could bring in an extra £14bn per year for HMRC. This coupled with the Government’s needs to pay for all of the recent borrowing has created a breeding ground for discussion when it comes to CGT.
Beyond all the headlines, it’s important to keep in mind that the Chancellor is yet to comment on whether an increase in CGT rates will be used to raise funds, and no plans have yet been set out. The second report, which is due early next year, should provide further detail and clarification.
Whilst none of us can predict the future, now is a good time to start planning ahead and reviewing your position in case changes do come into play.
Who would the potential changes impact?
CGT is applied to the gains you make on the sale of assets, shares or a business. If changes were to come into play, and you are planning to sell any of the above it could have an impact on your plans.
An increase in rates could also be significant blow for business owners, when considering the reduction to the lifetime limit on Entrepreneurs’ Relief earlier this year. As a consequence, business owners looking to exit their business in the next few years may bring their plans forward.
Although very few people would be impacted by the potential change, the returns could be high. Therefore, being aware of your options available to you now could be crucial, as planning doesn’t work retrospectively.
Planning your next steps
With no concrete evidence to suggest that tax rates are going to increase, now is not the time to panic and rush through a bad deal. Instead, you should forward plan and get prepared.
Speaking to a professional advisor is always a safe bet. They can help you look at what your financial position is now and how exposed you could be to any changes in the future. Take selling a second home, for example. If CGT was brought in line with income tax, this could have a serious impact on the amount you pay when you come to sell.
Ultimately, this may drive your decision to sell a particular asset sooner rather than later.
How can we help?
Our expertise is drawn from years of working closely alongside business owners and individuals, helping them to manage their affairs efficiently and effectively, whilst staying compliant.
By looking at your investment strategies, upcoming plans and current position, we can see more than just CGT and review where you stand as a whole. Whether it’s Inheritance Tax, pensions or property, we provide all the services you need to manage and protect your personal finances. We can help to place you in the strongest possible position.
Find and contact your local Haines Watts office