The Treasury has dismissed recommendations from the Office of Tax Simplification (OTS) to align capital gains tax with income tax, instead accepting a handful of technical changes to the tax.
Lucy Frazer, financial secretary to the Treasury, said changes to the rate of capital gains tax or annual allowances are not under consideration as "these reforms would involve a number of wider policy trade-offs" that require "careful thought".
Capital gains tax applies at rates varying between 10% and 28%, depending on the type of asset being disposed of and the vendor's marginal type of income tax.
Responding to the OTS' initial recommendation to raise capital gains tax rates, Robert Colvile, director of the Centre for Policy Studies, said in November 2020:
"Raising capital gains tax will discourage people from starting businesses, make it harder for startups to scale up, impede entrepreneurship and damage economic dynamism and national prosperity."
The Government accepted five out of 14 smaller technical changes that the OTS had previously suggested, including:
- the creation of a central hub for reporting and storing capital gains tax data
- an extension to the ‘no gain, no loss' on separation and divorce
- an expansion of rollover relief to cover land and buildings under compulsory purchase orders.
Talk to us about the changes to capital gains tax.