Hunt set to launch capital gains raid

Savers, landlords and entrepreneurs face tax hit in Autumn Statement as Chancellor tries to plug £50bn hole in public finances

JEREMY HUNT is preparing a raid on entrepreneurs, savers and landlords to help plug the £50billion hole in Britain’s public finances, The Daily Telegraph can reveal.

The Chancellor is considering an increase in the headline rate of capital gains tax (CGT) and taxes on dividends in the Autumn Statement.

As well as changes to the headline rate, reliefs and allowances on CGT, he is also considering hitting savers with an increase in dividend taxes. Officials are also working on a cut to the £2,000 tax-free dividend allowance.

The potential tax rises prompted a backlash from business leaders, who said it would undermine enterprise and saving. Landlords have already faced an increased squeeze on returns since the 2019 general election.

However, Mr Hunt and Rishi Sunak, the Prime Minister, had agreed that those with the “broadest shoulders” should bear the brunt of efforts to shore up the public finances, Treasury sources said.

Capital gains tax is levied on profits made from selling an investment, including shares and properties that are not the main home.

Treasury sources said sweeping changes to CGT, including to the headline rate, were being considered but cautioned that much could change before the Autumn Statement on Nov 17, as the fiscal black hole facing Mr Hunt shifted. It is understood that reductions in CGT reliefs and allowances are most likely to be given the green light, while officials have put an increase to the headline rate on the table given the scale of the fiscal shortfall.

Mr Sunak has considered increasing CGT to bring it in line with income taxes, a raid which would have raised an estimated £16billion.

CGT is expected to raise £15billion in 2022-23, or 1.5 per cent of all receipts.

At present, rates vary from 10 per cent to 28 per cent depending on the type of asset and the income of the taxpayer.

The Treasury said it would not comment on speculation in the run-up to the Autumn Statement.

Mr Hunt will announce the new taxation and spending approach in a fortnight, with discussions ongoing with No10 and Whitehall departments.

But The Telegraph can reveal that, despite a sharp rise in mortgage rates and predictions of steep house price falls, Treasury officials are not planning any extra help for homeowners.

There will be no extension of the stamp duty cut adopted by Liz Truss, a Whitehall source has said, meaning no extra intervention targeted at propping up property prices.

Nor is the Treasury working on a new scheme to help people at risk of mortgage defaults, despite calls for such a move from cost of living campaigners.

A Whitehall source said: “We have a fiscal hole north of £50billion. We have to cover that with spending cuts and tax rises to try to balance the books.”

Mr Hunt and Mr Sunak want to find the money equally between tax rises and spending cuts. The approach means that despite the economy already being in recession, according to the Bank of England, the Treasury is preparing to tighten fiscal policy.

Yesterday Mr Hunt acknowledged the hardships being faced. “Today’s news [of a rise in interest rates by the Bank of England] is going to be very tough for families with mortgages up and down the country, for businesses with loans,” he said.

“But there is a global economic crisis; the International Monetary Fund says a

third of the world’s economy is now in recession.”

The Chancellor also defended his approach, saying: “The best thing the Government can do if we want to bring down these rises in interest rates is to show that we are bringing down our debt.”

Increasing CGT would have echoes of the approach George Osborne adopted when the Conservative-liberal Democrat Coalition took office in 2010.

Mr Osborne increased capital gains tax, bringing in a new rate of 28 per cent for higher rate income taxpayers.

But as the economy grew and after the Tories won a majority at the 2015 general election, he cut the higher rate to 20 per cent and the basic rate cut from 18 per cent to 10 per cent.

In recent weeks Mr Hunt has held talks with Mr Osborne about the approach he should adopt, offering a possible hint at why he is looking at the move. “Families up and down the country have to balance their accounts at home and we must do the same as a Government,” he said.

Mr Hunt is looking at raising the dividend tax rate and a cut to the tax-free dividend allowance in a £1billion-a-year tax raid on pensioners, business owners and the self-employed.