Possible Capital Gains Tax (CGT) changes in the October budget
Many commentators are suggesting that the rate of CGT might be aligned with the rates of income tax, a return to the regime that applied when Gordon Brown was chancellor. Rachel Reeves is known to be a disciple of Gordon, so maybe we will see a return to taper relief as well!
One would hope that Business Asset Disposal Relief (BADR), or something similar, is retained to encourage entrepreneurship and growth. She might even reintroduce Business Asset Taper, one of Gordon’s ideas, to reduce the effective CGT rate to 10% after 10 years’ ownership? If some form of CGT relief to encourage entrepreneurs is retained then maybe the conditions for obtaining the relief will be tightened still further?
Other possible changes to CGT to listen out for include further restrictions to private residence relief and changes to hold over relief for transfers into and out of trust. A more controversial change would be the removal of the CGT free uplift to probate value on death, with beneficiaries inheriting the deceased’s CGT base cost of their assets, as suggested by the now abolished Office of Tax Simplification (OTS).
Should be bring forward asset disposals before budget day?
CGT changes normally take effect from 6 April, but there have been mid-year changes in the past. This possibility has caused many taxpayers to bring forward disposals to take advantage of the current rates.
The disposal date for CGT is the date of unconditional exchange of contracts and there is likely to be anti-forestalling legislation to counteract attempts to artificially bring forward the disposal date.
There is still time to sell listed investments before 30 October but other assets such as a business or property typically take a lot longer to sell unless a buyer is already lined up.
