Investment Trust Insider: Mike Hayes on CGT

In an article exploring the imminent review of capital gains tax by the Chancellor, Mike Hayes considers the divergence between CGT and IHT. Hayes said: ‘An apparent anomaly that will emerge from this review is that the top rate of capital gains tax on most disposals is 20% whereas the top rate of income tax is more than double that at 45%. This means that, where possible, individuals plan to realise capital gains instead of income. If this is viewed as a distortion in people’s behaviour rather than sensible tax planning, the outcome of the review could be a closer alignment of the income and CGT rates – especially where assets have been held for comparatively short periods.’

He continued: ‘Principle private residence relief is within the scope of the review and although it has already been heavily restricted in recent years, more changes could be coming down the track. The chancellor has not shown much enthusiasm for a wealth tax so far, but given that much of the population’s wealth is tied up in their homes, restricting the CGT exemption on a person’s home would enable him to tap into this vast source of wealth.’

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