Rishi Sunak’s advisers on tax reform have suggested increasing capital gains tax (CGT) in a move that would significantly affect high and middle-income earners.
What does the Office of Tax Simplification (OTS) advising the Treasury to consider precisely? Their first report released on Nov 11 covers principles underpinning CGT and policy design. Since the Government is actively looking for ways to repair the public finances, it puts the Treasury under pressure to raise the level of CGT. Their recommendation of alignment of CGT rates with income tax may lead to effective top CGT rate of 45%.
Additionally, the OTS recommends to tax accrued profits of owner-managed companies and for example, shares issued to employees at income tax rates. If your private company generate, but not distribute significant gains, it will face new tax rates.
The business property relief as exemption from inheritance tax may soon be dropped too. Investors relief and entrepreneurs’ relief may be abolished as well. These proposals taken together will affect long-term decisions and expectations on the UK real estate market, reshape the UK tax landscape and change the balance between the taxation of capital and income. The upcoming fundamental change in CGT may affect the current real estate boom in the UK.
A second report of the OTS to the Treasury will follow at the beginning of 2021. Oracle Capital Group will continue to monitor the situation. Our specialists provide real estate, share and asset purchase transactions support, improve shareholder participation, and provide general corporate support to your business.