Home UK News Chancellor considers capital gains tax increase to pay for pandemic debt

Chancellor considers capital gains tax increase to pay for pandemic debt

A report finds that £14bn could be raised by increasing capital gains tax rates to bring them in line with income tax

Capital gains tax could be increased in the UK in order to help pay back the billions of pounds that had been borrowed to support the nation’s economy amid the COVID-19 pandemic.

A report that had been commissioned by the Chancellor of the Exchequer, Rishi Sunak, has said that the Treasury could potentially raise £14bn by increasing the country’s capital gains tax rates in order to bring them in line with the UK’s income tax.

Capital gains tax is a type of tac that is applied on the profits from the sale or disposal of financial shares and other property, such as those of a second home, that has an annual allowance of £12,300.

This comes after the deputy chief medical officer for England, Professor Van Tam, has said that he will be encouraging his own mum to get a COVID-19 vaccine when one is approved, as he assured the British public that safety standards would not be compromised in the face of the public health emergency.

The Office of Tax Simplification (OTS) report has recommended that the UK government should consider reducing the allowance of £12,300 to between the range of £2,000 and £4,000.

But taking this recommendation into consideration and doubling the rates (currently 10% for basic-rate taxpayers and 20% for higher-rate taxpayers) could encourage the British public to change their financial behaviour, the report has said.

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Bill Dodwell, tax director at the OTS, said: “If the government considers the simplification priority is to reduce distortions to behaviour, it should consider either more closely aligning capital gains tax rates with income tax rates, or addressing boundary issues as between capital gains tax and income tax.”

Only 0.5% of people in the UK had paid the capital gains tax between the years of 2017 and 2018. Some 265,000 people contributed £8.3bn to the Treasury, with 60% of the country, (31.2 million people), paying £180bn in income tax in the same time period.

New guidance will say that students in the UK will be allowed to travel home for Christmas between the 3rd and 9th of December to make sure families can be reunited. Universities in England should stop all in-person teaching and will be reverting to online-only classes by early December, allowing students to return safely home for Christmas, the government has now said.

The national debt had passed £2trn for the first time in July, as the nation’s economy buckled under the effects of the COVID-19 pandemic as well ad the cost of supporting UK businesses and workers through this health crisis.

At the time, Rishi Sunak warned that “difficult decisions” would need to be taken. The review was commissioned back in July but the Treasury is not required to follow these recommendations from the OTS.

Chancellor considers capital gains tax increase to pay for pandemic debt
Chancellor of the Exchequer, Rishi Sunak

This follows another report that has suggested that people earning over £19,500 a year should be paying more in income tax in order to help boost the UK’s public finances.

The Resolution Foundation has recommended a “health and social care levy”, which would be a 4% tax on all incomes over £12,500, which would be offset by a 3% cut to the cost of employee national insurance and the abolition of Class 2 National Insurance contributions for the self-employed.

It said the shift would not penalise those worst-hit by the virus crisis restrictions – the low-paid and self-employed – but would raise £17bn annually. It was suggested £6bn of that sum should go to social care.

Eve Cooper
Eve Cooper
I've been writing articles and stories for as long as I can remember and in the past few years I've had the fortune of turning that love & passion for writing into my job 🙂

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