What is capital gains tax? Jeremy Hunt ‘considers capital gains tax hike’ to fix £50bn hole
Jeremy Hunt is staging a ‘raid’ on savers, homeowners and entrepreneurs to plug the £50billion black hole in UK public finances, according to a report by The Telegraph. The Chancellor is “assessing” an increase in the rate of capital gains tax (CGT) as well as taxes on dividends before the fall declaration.
Reports indicate that not only are officials staging a reduction in the tax-free dividend allowance of £2,000, Hunt himself is planning changes to the rate and allowances on CGT while hitting the aforementioned groups with an increase in l dividend tax.
What is capital gains tax?
According to the UK government, CGT is a “tax on profits when you sell (or ‘give away’) something (an ‘asset’) that has increased in value.
“It is the gain you make that is taxed, not the amount of money you receive. For example, if you bought a painting for £5,000 and later sold it for £25,000, you made a profit of £20,000 (£25,000 minus £5,000).
The Economic Times reports that “assets are things you own that you can sell for money” and that CGT is levied on profits made on the sale of those assets. CGT rates depend on the taxpayer, for basic taxpayers it is charged either 10 or 18% but for additional rate taxpayers, it is at 20 or 28%.
What does Jeremy Hunt expect with capital gains tax?
Jeremy Hunt, the new Chancellor of the Exchequer after the sacking of Kwasi Kwarteng, is considering an increase in the headline CGT rate and dividend taxes in the autumn statement. These tax hikes immediately provoked backlash from business leaders who protested that it would undermine business and savings, and in particular owners who “faced pressure from increasingly strong on returns” following the 2019 general election.
Hunt and Conservative leader Rishi Sunak, however, concluded that those with the “broadest shoulders” should be held accountable for obstructing public finances. The Telegraph report details a Treasury source who said big changes are being considered for CGT, but a lot can change before the autumn statement in mid-November.
A Treasury spokesman also said Sunak and Hunt agreed that “everyone should contribute more taxes in the years to come.”
How much should capital gains tax increase?
Capital gains tax expected to rise £15 billion this tax year which represents about 1.5% of the total contribution of the Treasury, according to the report of the Office for Budget Responsibility.