October 18, 2024 1:44 pm

Insert Lead Generation
Nikka Sulton

In the lead-up to the Autumn Budget, Chancellor Rachel Reeves is reportedly focusing on a potential increase in Capital Gains Tax (CGT) applied to the sale of shares, rather than targeting second homes. This insight comes from former Treasury officials who have shared their views with the Financial Times. The decision marks a significant move as the government looks for ways to balance its budget while addressing growing financial concerns.

According to these reports, the Chancellor’s primary aim is to adjust the current 20% CGT rate on shares and other assets. The move is expected to generate additional revenue, which will help close a projected funding gap of around £40bn. This gap has been a major point of concern for the government, and the adjustment in CGT is seen as a crucial part of the strategy to address it without significantly impacting the property market, particularly second homes.

The decision to focus on share sales rather than property is noteworthy. In previous years, there has been speculation that the government might target second homes for CGT hikes, especially given the housing market’s ongoing issues with affordability. However, by concentrating on share sales, the Chancellor seems to be taking a different approach, likely to avoid further disruptions in the housing sector, which remains a key focus for many voters.

Raising CGT on the sale of shares is considered less controversial than targeting property, especially during a time when many homeowners are already dealing with rising interest rates and inflation. By targeting financial assets instead, Reeves may be looking for a politically safer route to generate revenue without causing a significant public backlash. This shift in focus may also reflect the government’s broader economic strategy, as it attempts to stimulate investment and protect key sectors of the economy.

The full details of the Autumn Budget will be revealed soon, but these early indications suggest that the government is carefully weighing its options to balance fiscal responsibility with economic stability. How this will affect investors, homeowners, and the wider economy remains to be seen, but the approach could signal a more measured, less aggressive tax strategy than some had anticipated.

Edward Troup, the former head of HM Revenue & Customs, shared his views with the Financial Times, suggesting that Chancellor Rachel Reeves may explore the option of equalising Capital Gains Tax (CGT) rates for shares and property. According to Troup, a move towards a rate of around 24% could be on the table as part of the Chancellor’s broader tax strategy. This potential adjustment would reflect efforts to create a more balanced approach to CGT, with both shares and property taxed at similar levels.

Troup explained that there has been ongoing discussion about how CGT is applied differently to shares and property, with property currently being subject to higher rates. By equalising these rates, the government may address perceived imbalances in the tax system while also working towards closing funding gaps. With the Autumn Budget approaching, these considerations are becoming more relevant as the government looks for ways to generate additional revenue.

In his remarks, Troup pointed out that a single rate in the “mid-20% range” would be a reasonable and realistic option for the Chancellor to consider. This would represent a middle ground, avoiding overly steep increases while still contributing to the government’s fiscal objectives. The idea of aligning the rates could also be seen as part of a larger effort to simplify the tax code and make it more equitable.

While the specifics of any CGT adjustments are yet to be confirmed, the possibility of rate equalisation is likely to draw attention from investors, property owners, and tax professionals. As the government continues to evaluate its fiscal strategies, proposals like this one will be closely watched for their potential impact on both the housing market and stock investments.

These reports follow recent statements from Prime Minister Keir Starmer, who has made it clear that he believes those with the “broadest shoulders” should take on more of the financial responsibility when addressing the country’s funding challenges. This stance aligns with the government’s broader aim of targeting wealthier individuals to help fill the fiscal gap, which is becoming a significant concern for the upcoming Budget.

There has been considerable speculation surrounding the potential increase in Capital Gains Tax (CGT), with some reports suggesting it could rise as high as 39%. However, Starmer has recently downplayed these predictions, indicating that such a sharp increase is unlikely. While the government is keen to raise revenue, ministers appear cautious about implementing dramatic hikes in CGT that could affect a wide range of investors and homeowners.

Despite ongoing discussions, the Treasury has not provided any specific details on potential tax changes, remaining silent on whether CGT will be adjusted in the upcoming Budget. Speculation about targeting the sale of shares rather than property continues, but no concrete measures have been outlined publicly by government officials.

With the Budget set to be delivered on the 30th of October, it remains unclear how CGT or other tax policies will be addressed. Many anticipate that any adjustments will be balanced with the need to protect economic growth while addressing the estimated £40bn funding gap. Until the Chancellor’s plans are revealed, uncertainty around tax changes, including the future of CGT, will likely continue to fuel debate.

 

 

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