Capital Gains tax coming your way?

The government has been generous during the Covid-19 crisis, with furlough payments to help preserve jobs, VAT holidays and more.

But that generosity will have to be paid for as the country’s spending approaches £1 trillion for the first time in history and a struggling economy stifles the state’s tax income. Tax rises will be needed, experts are warning.

Capital Gains tax could be one of the taxes due for a hike. At Continuum we help you see if you might find yourself caught up in it.

What is Capital Gains tax?

Capital Gains Tax – CGT – is the tax you pay when you sell an asset that’s increased in value.

It is complicated by the fact that it is the profit you make that’s taxed, not the amount of money you receive, and by the way it depends on your overall income.

CGT is a complex area and whether you are basic, higher or additional rate taxpayer you will need to consider your own tax position and seek professional guidance.

But there are some concessions. CGT is not charged when you sell your main residence, and you do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance, currently £12,300 for individuals, and £6,150 for trusts.

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Will you be liable for CGT? Get a free initial opinion from a Continuum expert here.

What is changing?

The Chancellor Rishi Sunak needs to plug a £1 trillion hole in public expenditure caused by coronavirus. He has commissioned a review of Capital Gains Tax, sparking fears the relatively low current rates will be increased. He has asked the Office of Tax Simplification to conduct the review, which will assess whether the current rates are fit for purpose and whether certain reliefs and exemptions could be scrapped – including the exemption from the levy that applies to people selling their homes

CGT raises less than £9bn a year making up less than 1% of Treasury income. Income tax, the Government’s largest single source of revenue, generates almost £200bn. It has been suggested CGT could be due for a substantial increase.

There is speculation about what changes will be recommended as the result of the review.

Bringing CGT rates in line with income tax, 20% for basic rate payers, 40% for higher rate earners and 45% for additional rate taxpayers is one suggestion. Currently, wealthier taxpayers have an incentive to take their income from investments gains because of the lower rate of CGT.

Reducing the £12,300 annual CGT allowance to bring it in line with the £2,000 dividend allowance would also reduce the incentive to take income in the form of gains.

A third possibility is scrapping the nine month tax-free period between buying a second home and selling a main home, which provides a loophole for those with more than one home to avoid CGT when they buy and sell properties.

If this was scrapped, an individual would have to sell the moment they moved out. The capital gain would be time apportioned to reflect the loss of main residence relief.

But the most worrying of all possibilities is that primary residence relief could be abolished. Scrapping the 0% rate of CGT for people selling their home altogether is unlikely, experts have said, as it would put people off moving home, act against the Chancellor’s temporary stamp duty holiday designed to re-energise the housing market – and would unfairly penalise those downsizing.

Our expertise could cut your CGT bill, making all your investing potentially more rewarding. Book a meeting with a Continuum expert today

What happens now?

The government was looking at ways to make paying CGT “simpler and quicker” for taxpayers back in 2016.

A cynic might suggest that this had very little to do with making things simpler for taxpayers, and a great deal to do with increasing revenues for HMRC. It would certainly be the objective now.

But if tax changes are coming, you might want to be prepared.

Selling investment property sooner rather than later might be one thing to consider but there are other ways to reduce the impact of CGT. If you previously made a loss on an investment or property you can use this to offset any future gain, you could wait until you retire and your income is reduced – or you could not sell the asset at all, as CGT does not apply after death.

It looks as though getting professional help with your tax planning may be more important than ever. At Continuum, we will be pleased to provide the help you need.


The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances.

The Financial Conduct Authority does not regulate taxation advice



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