01273765959 mail@griffithsmithfm.co.uk

Capital gains tax: increases on the way?

10th December 2020

A recent report could herald changes to capital gains tax.

Capital gains tax: increases on the way?

Last July the Chancellor asked the Office of Tax Simplification (OTS) to undertake a review of capital gains tax (CGT) “in relation to individuals and smaller companies”. The request was something of a surprise for two reasons. Firstly, there had been no suggestion that Mr Sunak wanted to reform CGT. Secondly, two earlier reports on another capital tax, inheritance tax (IHT), had been sitting in the Treasury’s in-tray for over a year, awaiting attention.

Cynics pointed out that while the Conservatives’ 2019 manifesto promised no increases to the rates of income tax, VAT and national insurance, there was no such protection for CGT. Certainly, the ideas put forward by the OTS would raise extra revenue for the Treasury’s depleted coffers, but probably not the £14bn seen in some of the November headlines.

The OTS made eleven proposals for the government to consider. The more significant were:

  • CGT rates should be more closely aligned with income tax rates, implying the maximum tax rate on most gains could rise from 20% to 45%.
  • The annual exempt amount, currently £12,300 of gains, should be reduced to a “true de minimis level” of between £2,000 and £4,000.

When IHT relief applies to an asset, there should be no automatic resetting of CGT base values at death, as currently occurs. The OTS also suggested that the government should consider whether to end all rebasing at death, meaning that the person inheriting an asset would be treated as acquiring it at the base cost of the person who has died.

The £1m Business Asset Disposal Relief, which only replaced the £10m Entrepreneurs’ Relief in March 2020, should itself be replaced with a new relief more focused on retirement.

The OTS paper underlines just how favourably capital gains are currently treated relative to income. As the tax year end approaches, the report is also a reminder to examine your use-it-or-lose-it options for the 2020/21 annual exemption and to top up your CGT-free ISA. 

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. 

The value of your investment and income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  


Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

To discuss in more detail, please contact one of our advisors.

Griffith Smith Financial Management Limited is an appointed representative of North Laine Financial Management Ltd which is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 704336 http://www.fca.org.uk/register.

Griffith Smith Financial Management Limited Registered Address: West Wing, 47 Old Steine, Brighton, BN1 1NW. Registered in England & Wales, No. 08943379.

Neither Griffith Smith Financial Management Limited nor its representatives can be held responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The Financial Conduct Authority does not regulate National Savings or some forms of mortgage, tax planning, taxation and trust advice, offshore investments or school fees planning.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

The information contained within this site is subject to the UK regulatory regime and is therefore targeted primarily at consumers based in the UK.

Please read our Privacy Statement before completing any enquiry form or before sending an email to us.