The Treasury has launched a evaluation of the capital positive factors tax system to “make sure the system is match for function”.
Experts warned it might prepared the ground to “a tax seize” within the autumn.
“It could be naïve to imagine the chancellor did not have his eye on tweaking taxes to refill his coffers,” mentioned Nathan Long, analyst at Hargreaves Lansdown.
But the Treasury mentioned: “It is normal apply to maintain taxes below evaluation.”
Rishi Sunak requested the Office of Tax Simplification in a letter made public on Tuesday to analyze how capital positive factors are taxed for each people and smaller companies.
“This evaluation ought to establish alternatives regarding administrative and technical points in addition to areas the place the current guidelines can distort behaviour or don’t meet their coverage intent,” the chancellor mentioned.
“I’d be taken with any proposals from the OTS on the regime of allowances, exemptions, reliefs and the remedy of losses inside CGT, and the interactions of how positive factors are taxed in comparison with different forms of revenue.”
What do consultants say?
Katharine Arthur, associate at Hays Macintyre, mentioned: “This has potential to be a basic rejig of a whole space of tax, which might be massively vital for each people and small companies.”
Some concern that the Treasury might use the evaluation as an excuse to lift CGT charges.
“Currently capital positive factors are taxed at a a lot decrease stage than revenue, so there is a danger that on this setting, the chancellor will use this as a justification to hike CGT nearer to revenue taxes,” mentioned Nathan Long.
CGT charges are at present set at 10% for basic-rate taxpayers and 20% for larger and additional-rate taxpayers, or at 18% and 28% the place positive factors relate to residential property.
“With UK borrowing set to hit its highest stage in peacetime historical past, Chancellor Rishi Sunak’s request for a evaluation of CGT feels just like the beginning pistol for a tax seize forward of the Autumn Budget later this 12 months,” mentioned Tom Selby, senior analyst at AJ Bell.
“Given those that pay CGT are twice as more likely to pay higher-rate 40% revenue tax as taxpayers usually, the Treasury might have its sights set on aligning CGT charges and revenue tax charges.”
Simplify the tax
Other consultants welcomed the possibility to simplify the tax.
“There are many traps with CGT that may spring nasty surprises,” mentioned Sean McCann, chartered monetary planner at monetary advisers NFU Mutual.
“Few individuals realise that they might need to pay CGT once they give away property, shares or different investments.
“For instance, if a mother or father offers a second property or a portfolio of shares to their youngsters with a purpose to assist them out, that counts as a disposal and might be responsible for CGT.
“It would make sense to simplify the foundations to encourage the older era to go on wealth throughout their lifetime.”
Katharine Arthur at Haysmacintyre mentioned the federal government shouldn’t be tempted to hurry into asserting modifications within the Autumn Budget.
“It is essential that the federal government takes time to soak up all the data and suggestions it’ll obtain and the interplay with different taxes,” she mentioned.
The Treasury downplayed the issues, saying that CGT was one of many few taxes that had not been reviewed lately.
A Treasury spokesperson mentioned: “It is normal apply to maintain taxes below evaluation.
“Over the previous couple of years, the OTS has reviewed a lot of the main tax regimes aside from CGT, and a evaluation of CGT will now full its evaluation of all the foremost taxes.”
The Treasury has referred to as for proof to be submitted to the evaluation by 12 October.