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Landlords breathe sigh of relief as Sunak ducks CGT increase for now

  • 03/03/2021
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Landlords breathe sigh of relief as Sunak ducks CGT increase for now
Chancellor Rishi Sunak has frozen several tax allowances and thresholds in the Budget but avoided any increases to rates at which revenue is collected.


However, tax and accounting representatives warned that more significant changes may still be within Sunak’s sights.

Landlords and property professionals were particularly concerned about the prospect of a significant increase to the rate of Capital Gains Tax (CGT) to match that of Income Tax as suggested by the Office for Tax Simplification (OTS).

However, Sunak (pictured) only announced that the value of gains a taxpayer can realise before paying CGT will be maintained at the present level until April 2026.

The Annual Exempt Amount (AEA) threshold will remain at £12,300 for individuals, personal representatives and some types of trusts, and at £6,150 for most trusts.

The policy is expected to earn an extra £65m in total by the end of the 2025-26 tax year.

However, other tax thresholds not being increased with inflation could have much more significant tax revenue impacts.


Personal tax allowance frozen

The personal tax allowance which is how much people can earn each year before paying income tax will increase to £12,570 in April from £12,500 but will then not be increased again before April 2026.

There will also be a freeze of the threshold at which people start paying the higher rate of income tax, which will increase to £50,270 in April from £50,000 and remain there until 2026.

Combined, these changes are likely to earn more than £19bn in additional Income Tax revenue over the period.


Inheritance tax and VAT

The thresholds at which estates start to pay inheritance tax have been frozen until April 2026 – they currently stand at £325,000 for individuals and double that to £650,000 for couples.

The change is predicted to claim almost £1bn more in additional tax over the five-year period.

And the threshold at which businesses must register for VAT will be held at £85,000 for the next five years – that is expected to generate around £480m more in revenue.


‘False sense of security’

Rebecca Williams, head of wealth planning at Brown Shipley, noted that the “big freeze” lasts until 2026 and will bring more taxpayers into the higher tax brackets.

“Changes to Capital Gains Tax were widely anticipated but ultimately didn’t materialise today, with the chancellor rightly focusing on the pressing matter of kick starting the economy,” she said.

“However, we shouldn’t be lulled into a false sense of security. This doesn’t preclude the chancellor raising rates of CGT and the spectre of alignment with income tax rates is still hovering in the background.”

Tim Snaith, partner at Winckworth Sherwood, added the lack of action on some of these tax changes was surprising.

“That is not to say that the door has now closed on these changes; in fact, we think it remains wide open and that the chancellor will turn his attention to some of them in due course,” he said.

“It is also interesting to see the Government’s forecast for inheritance tax receipts for the coming year has, for the first time, reached £6bn.

“With this news and the OTS’ most recent report on the subject in hand, it remains an area we believe that is due for significant reform in the coming couple of years.”



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