Monday, December 23, 2024

Rumours of CGT hike grow – Mortgage Finance Gazette

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Speculation has been mounting over the weekend that the Chancellor is eyeing an increase to capital gains tax to help pay for public spending.

According to the weekend papers, Rachel Reeves is considering bringing CGT rates in line with income tax – a move which was previously investigated by the Office for Tax Simplification in 2020.

Reeves is due to give a speech at 3.30pm today.

She is expected to highlight a £20bn gap in public finances and announce a date for the Budget.

The 2022/23 tax year was a record year for CGT, with receipts at £17bn and there has been a fourfold increase over ten years, according to Hargreaves Lansdown.

However, Cabinet Office minister Pat McFadden has said there will be no announcement on CGT today and no tax changes will be revealed before the Budget.

He told Times Radio: “Today is not a budget, people shouldn’t expect tax announcements today.

“We said a number of things about tax during the election, we said that we wouldn’t increase income tax rates, national insurance rates, or VAT.

“Those things still hold.

“Today, what you will hear is how we are going to respond to that opening of the books. 

“And I think what people should expect today is not tax measures but a chancellor that is prepared to take some very tough decisions on spending, to show that we put financial stability first and we take seriously that as the foundation for growing the economy.”

Hargreaves Lansdown head of personal finance Sarah Coles says: “Capital Gains Tax speculation has intensified. 

“As Rachel Reeves peers into the hole in the public finances and is set to reveal just how deep it goes, rumours are swirling as to whether CGT changes could be used to generate extra cash to help fill it.”

But bringing CGT in line with income tax would lead to a “shocking hike for UK investors”, running the risk that more people would hoard their profits until they die.

She says: “This would mean, for example, buy-to-let investors refusing to part with properties they don’t really want in an effort to avoid CGT, while first-time buyers struggle to get on to the property ladder.”

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