On 30th October, Labour’s Rachel Reeves will deliver her first Budget. It’s now widely expected that she will announce increases to capital gains tax (CGT).
And, wait for it, some, or all of any changes announced could take effect immediately, rather than on 6th April next year. Time is therefore of the essence when it comes to CGT planning.
If you’re in the process of selling your business or disposing of buy-to-let properties, bear in mind the possible consequences of delaying your transaction. Possible changes include:
- The abolition of business asset disposal relief (formerly entrepreneur relief) which allows you to pay just 10% CGT the first £1 million of gains on the disposal of a business.
- An increase in the 20% rate of CGT that you’d pay on the remaining gain from the sale of a business.
- An increase in the rates of CGT you’d pay on the gain made when selling a buy-to-let property; these rates are currently 18% for a basic rate taxpayer and 24% for a higher rate taxpayer.
It has been rumoured that the chancellor is considering aligning CGT rates with income tax rates – currently 20% for a basic rate taxpayer, 40% at higher rate and 45% for those with income in excess of £125,000. There is no evidence that this is going to happen, so we might see a new flat rate of CGT at around 30%, for example.
Capital gains tax receipts make up a very small proportion of the government’s total tax take, so there’s an argument that tinkering with rates in a way that, for example, discourages entrepreneurs to build and sell valuable businesses, will do more harm than good to the economy – ultimately, reducing the amount the government collects in income and corporation taxes (which would have a much bigger, but negative, impact on the economy).
Is there a call to action here? Well, I don’t think any threat of an upward move in CGT is going to lead you to list your business for sale this weekend – it does, after all, take a long time to get a business ‘sale ready’. But, if you’re in the process of selling or doing some sort of share reorganisation that will trigger CGT liabilities, the message is clear – get on with it! And, if you’re thinking about tidying up your property portfolio by listing those two terraced houses that have increased in value since you bought them but are a headache to manage -call the estate agent in now!
30th October isn’t far away; the days are already shortening! And, your ‘window of opportunity’ to capitalise on the current, fairly generous CGT regime could be shortening with it!
