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You can’t escape coverage of capital gains tax at the moment. We’ve had the details of the prime minister’s tax return with its £1.8m of gains taxed at 20% and then the story that more capital gains tax was paid by residents of Notting Hill than by the total population of Liverpool, Manchester and Newcastle. There is also a plethora of advertisements extolling the virtues of casks of whisky as exempt assets.
Together these show that CGT remains an important, and controversial, area of our tax code. Some of the coverage of Mr Sunak’s tax affairs suggested that he had deliberately not increased capital gains tax because it suited his own purpose to keep the rate low – I even saw the CGT rate described as a loophole.
We don’t seem to be able to make up our minds about the rate at which gains should be taxed. Nigel Lawson certainly thought that they should be taxed as income because in economic terms there was little difference between the two. But other chancellors have been determined to maintain a rate differential and the current rate of 10% for a basic rate taxpayer is, I think, the lowest positive rate we have ever seen in the UK.
But by contrast we will, in a couple of months, be going into a regime where the annual exempt amount is only £3,000, a level last seen in the early 1980s. That will bring far more people into the CGT net but probably won’t raise much by way of additional revenue.
I doubt that the chancellor will launch a wholesale review of CGT in next week’s Budget but, at some point, perhaps after the election, it is surely time for some of the fundamentals to be looked at again.
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