Sunak review sparks capital gains tax relief fear

Rumours that capital gains tax (CGT) rates could be changed to help foot the bill for Covid-19 emergency financial measures are raising alarm bells.

Chancellor Rishi Sunak has announced a review of CGT and its reliefs.

He has asked the Office for Tax Simplification for proposals on the allowances, exemptions, reliefs and how gains are taxed compared to other types of income.

Financial planning business Jarrovian Wealth believes this could spell bad news if Sunak meddles with them.

The firm says the current reliefs are exactly what investors and small firms need to encourage them to take the leap of faith and set up new ventures to keep the economy firing.

CGT rates are lower than other taxes, charged from 10% to 28%, but there is the prospect they could be brought in line with income tax.

“This would be a huge further blow for investors and entrepreneurs coming hot on the heels of Entrepreneurs’ Relief being slashed from £10million to £1million,” says Adam Young, a founding director of Jarrovian Wealth.

“The relief, providing a lower rate of CGT at 10%, is on shaky ground and at risk of being withdrawn.

“While the Treasury has said it is standard to review taxes and reliefs regularly, the current CGT one is raising alarm bells.

“The Government desperately needs to find ways to rake in some money to cover the vast costs of the pandemic and ease the groaning public purse.

“Whatever the review decides later this year, from a complete overhaul of CGT to ditching the £12,300 annual exempt amount, it will affect share scheme arrangements such as the Enterprise Management Incentive that secures Entrepreneurs’ Relief and a 10% CGT on £1million.

“It will also impact the Company Share Option Plan.

“These reliefs are vital to help encourage the entrepreneurial spirit, and constant meddling does nothing but cause confusion and stifle investment.

“Small businesses seeking to scale up are the backbone of the UK economy and will be crucial in helping to get the country back on its feet, creating jobs to replace the huge numbers lost due to the coronavirus crisis.

“Let’s hope the Chancellor realises this too.”