The Treasury has dismissed recommendations from the Office of Tax Simplification (OTS) to allowing capital gains tax with income tax, instead accepting a handful of technical changes to the tax.
Lucy Frazer, Financial secretary to the Treasury, said changes to the rate of capital gains tax or annual allowances are not under consideration as “these reforms would involve a number of wider policy trade-offs” that require “careful thought”.
Capital Gains Tax applies at rates varying between 10% and 28%, depending on the type of asset being disposed of and the vendor's marginal type of income tax.
Responding to the OTS’ initial recommendation to raise capital gains tax rates, Robert Colville, director of the Centre for Policy Studies, said in November 2020:
“Raising capital gains tax will discourage people from starting businesses, make it harder for start-ups to scale up, impede entrepreneurship and damage economic dynamism a national prosperity.”
The Government accepted five out of 14 smaller technical changes that the OTS had previously suggested, including;
The creation of a central hub for reporting and storing capital gains tax data;
An extension to the “no gain, no loss” on separation and divorce;
An expansion of rollover relief to cover land and buildings under compulsory purchase orders.
What you pay it on
You pay Capital Gains Tax on the gain when you sell (or “dispose of”):
Most personal possessions worth £6,000 or more, apart from your car;
Property that's not your main home;
Your main home if you've let it out, used it for business or it's very large;
Shares that are not in an ISA or PEP;
These are known as “chargeable assets”. if you sell or give away crypto assets (like cryptocurrency or Bitcoin) you should cheque if you have to pay Capital Gains Tax.
Depending on the asset, you may be able to reduce any tax you pay by claiming a relief. If you dispose of an asset you jointly own with someone else, you have to pay Capital Gains Tax on your share of the gain.
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).
The Capital Gains tax-free allowance is:
£6,150 for trusts.