There is growing speculation that Sunak will hike capital gains tax (CGT) in a bid to raise funds to cover Covid bailouts and plug the deficit. Tens of thousands could be in the firing line and need to act fast if CGT rises.
You may be liable for capital gains tax when selling assets at a profit, including shares and other investments held outside of a tax-free Isa.
Profits on buy-to-let or holiday properties are also liable, and on paintings, antiques and jewellery, too.
Last year, CGT generated £10.6billion for HM Revenue & Customs, up fourfold from just £2.5billion in a decade.
Nimesh Patel, tax partner at accountancy firm Grunberg & Co, is warning that Sunak may be back for more when he unveils his Autumn Budget and Spending Review on Wednesday 27 October.
Now is the time to take action to avoid a potential Budget hike, Patel said.
Currently, basic rate taxpayers pay CGT at 10 percent on annual gains above £12,300, while higher-rate taxpayers pay 20 percent.
These rise to 10 percent and 28 percent respectively, when selling an investment property or second home.
Last year, the Office for Tax Simplification (OTS) suggested aligning these rates with income tax so that basic rate tax payers would pay CGT at 20 percent on everything, while higher-rate taxpayers would pay 40 percent.
Additional rate taxpayers would pay 45 percent.
People are right to be scared of such a thumping increase, which could more than double the tax bill in some cases, Patel said.
The good news is that you do not pay capital gains tax when selling your main home, thanks to private residence relief.
“Proposed CGT changes would primarily affect those with high-value assets, business owners and those with additional homes,” Patel said.
The bad news is that any increase to CGT could be introduced immediately at the time of the Budget.
Patel said: “However, the Chancellor may delay implementing changes until the beginning of the new tax year in April 2022.”
She said this could give people time to act. “Quick and careful tax planning is essential to avoid a substantial tax bill if a CGT increase is announced.”
There are plenty of things you can do to reduce your CGT exposure.
Free NHS prescriptions for over-60s axed. Who now pays – and who WON’T [REVEAL]
Britons turn heating OFF for winter as energy bills hit record highs [ANALYSIS]
‘Biggest crash in world history’ sparks new Gold Rush. Should YOU buy? [INSIGHT]
Use your annual exemptions. Currently, you can take £12,300 of gains a year without paying CGT. So you could spread any disposals over multiple tax years, to maximise this annual allowance.
Consider spouse transfers. Transfers between spouses and civil partners are also exempt from CGT, so a transfer to a partner would allow you to use their annual exemption too.
Offset losses against gains. You can offset capital gains against losses made in the same tax year, or even unused losses carried forward from previous tax years.
Invest in an Isa. Capital gains made on investments within an ISA are tax-free, so use your annual £20,000 allowance to protect your wealth from HM Revenue & Customs.
Check out the Enterprise Investment Scheme (EIS). This is an HMRC approved tax-efficient investment scheme that allows investors to buy company shares with CGT savings on gains.
Patel said tax planning can be complex and urged people to seek professional tax advice before taking action.Internet Explorer Channel Network