During the recent General Election campaign, the Conservative Party promised not to raise the rates of VAT, national insurance, income tax, or corporation tax. Following their success in achieving a slim majority in Parliament, the Chancellor has an opportunity to make good those promises in his Summer Budget on 8 July 2015.
So what tax raising options does that leave him? As the July Budget is billed as: “A Budget for working people”, one must assume that any tax rises will be borne by those who generate income other than as employees, perhaps from investing, or by the increase in the value of capital assets.
Capital Gains Tax (CGT) is essentially a tax on wealth generated by investments so it is obviously in the Chancellor’s cross-hairs. The Budget that followed the General Election in 2010 announced increases in the rates of CGT that took effect from the next day: 23 June 2010. The same could apply this year. So be prepared for an increase in CGT rates from 18% and 28% to align with those for income tax: 20%, 40% and 45% with effect from 9 July 2015.
Such a rates-hike will turn the spotlight on CGT reliefs, which are many and varied as detailed in CGT Reliefs for SMEs and Entrepreneurs 2014/15. Many of those reliefs have business continuation as a justification, so perhaps that will protect them from attack. However, Entrepreneurs’ Relief has been undermined in the 2015 Spring Budget and in the 2014 Autumn statement, so be prepared for further changes in that area.
The best known CGT relief for non-businesses is the exemption for gains made on the taxpayer’s only or main home. This relief was tweaked very slightly from 6 April 2015 for homes located overseas, but it could be amended to restrict the relief to homes under a certain value – perhaps £2 million. That would pour some cold water on an over-heated property market.
There is also scope for changing the date on which CGT is payable. Currently the tax is due nine months after the end of the tax year (or accounting period for companies) in which the gain arises, but as it is basically a transaction tax, it could be payable within, say, 30 days – like Stamp Duty Land Tax.
The new Non-Resident CGT, introduced from 6 April 2015 on gains made by persons who are not tax-resident in the UK, is payable within 30 days of the disposal if the person is not within the UK tax system. So a precedent has already been set for the rapid payment of CGT following a disposal.
Rebecca Cave is author of Bloomsbury’s Tax Rates and Tables 2015/16: Pre-Election Edition and co-author of Bloomsbury’s Tax Rates and Tables 2015/16: Finance Act Edition.
She is also co-author of Bloomsbury Professional’s Core Tax Annual: Capital Gains Tax 2015/16 and Capital Gains Tax Reliefs for SMEs and Entrepreneurs 2014/15.