Over the past couple of posts, we have been trying to respond to questions and concerns that our clients have expressed about possible tax changes coming under the new Government.

Needing to raise an estimated £50bn to fund their spending promises, we know that money needs to be found somewhere and as accountants, we are watching very closely to see what taxes might be impacted and when and how that might happen.

We want to be aware of any tax changes that could happen as quickly as possible so that we can work with our clients to understand what options they have for the best tax and financial outcome.

In our last post, we highlighted a few possible changes that we thought could impact pensions (Read here). In this post we will look at Capital Gains Tax (CGT).

Capital Gains Tax (CGT)

We have already mentioned CGT in previous posts, but as more details emerge from the Government, there are further indications of what kinds of changes might be on the way.

Harmonisation of income and capital gains tax rates

It seems possible that there could be harmonisation of income tax and capital gains tax rates – so if you’re a higher or additional rate taxpayer, you could expect to pay CGT at those levels. 

However, as the annual exempt amount for CGT has already been reduced to £3,000 for individuals, we think that it’s unlikely this will change. The annual exemption is the amount of profit you can make from selling assets without having to pay tax on it. 

The annual exemption does not apply to individuals who are non-domiciled in the UK and claim the remittance basis of taxation on foreign income and gains. 

(For more information about changes to the remittance basis for non-domiciled residents, you can watch our short film and contact us for advice.)

CGT on private residences

Since the election, we have also heard whispers about tax relief on principal private residences. 

It seems possible that a CGT could be introduced on gains made from the sale of private residences. While there are fears that this could deter individuals from selling their homes, it seems unlikely that this would permanently or significantly seize up the housing market, especially given that people continue to buy and sell homes despite the existence of Stamp Duty. 

It seems plausible to us, therefore, that when moving house, our new Government could potentially introduce taxes when selling homes (CGT) as well as buying them (Stamp Duty). 

Given the possibility of introducing tax on UK residents when they sell their homes, it seems only logical that the same could happen for UK non-residents when selling property. It’s now nearly ten years since the introduction of capital gains tax for non-residents on UK property, so why not harmonise it with the tax situation for residents? 

(For more details about CGT follow this link to our video or contact us for more information.)

What can you do?

If you are concerned about potential changes to CGT rules especially on property, we recommend that you get professional advice to understand what your options might be. While this isn’t so easy when it comes to your principal private residence, if you own buy-to-let properties there might be a number of different options to consider based on potential future tax changes. 

Even though we don’t know what eventual changes might come, it’s worth understanding any potential impact of change. Currently, we are working with a number of our clients to understand how various different future scenarios could impact them. 

As always, LSR Partners are here to help. We are ready and willing to discuss how we can support and advise you about how potential changes to CGT or pensions could affect you. 

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