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The capital gains tax could be raised to help pay back the billions of pounds borrowed to support the economy during the COVID-19 pandemic.
A report commissioned by Chancellor Rishi Sunak has said that the Treasury could raise £ 14bn by raising tax rates on capital gains to bring them in line with income tax.
Capital gains tax applies to gains from the sale or disposal of shares and other property, such as a second home, with an annual allowance of £ 12,300.
The report from the Office for Tax Simplification recommended that the government should consider reducing the allocation from £ 12,300 to between £ 2,000 and £ 4,000.
But doing this and doubling rates – currently 10% for base rate taxpayers and 20% for higher rate taxpayers – could encourage people to change their financial behavior, according to the report.
Bill Dodwell, OTS chief tax officer, said: “If the government believes that the priority of simplification is to reduce distortions in behavior, it should consider aligning capital gains tax rates more closely with capital gains tax rates. income, or address the problems of boundaries between capital gains tax and income tax. “
Only 0.5% of the population paid taxes on capital gains in 2017-18. Some 265,000 people donated £ 8.3 billion to the Treasury, while 60% (31.2 million people) paid £ 180 billion in income taxes.
the the national debt passed £ 2 trillion for the first time in July, when the economy sank under the effects of the coronavirus pandemic and the cost of supporting businesses and workers.
At the time, Mr. Sunak warned that “tough decisions” should be made.
The review was commissioned in July, but the Treasury does not have to follow the recommendations.
It comes after another report suggested that people making more than £ 19,500 a year should pay more in income taxes to help boost public finances.
The Resolution Foundation recommended a ‘health and social care levy’, a 4% tax on all income over £ 12,500, which would be offset by a 3% cut to employees’ national insurance and the abolition of contributions class 2 national insurance for the self-employed. employee.
He said the change would not penalize those hardest hit by the virus crisis restrictions, self-employed and low-wage workers, but would raise £ 17 billion a year. It was suggested that £ 6 billion of that amount should go to social assistance.
