Martin Lewis: How to claim working from home tax relief
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Last year, the Chancellor Rishi Sunak did not make any drastic changes to CGT as part of his Autumn Budget which came as a relief to many who feared a rate hike. However, even without Mr Sunak’s intervention, Capital Gains Tax receipts are forecast to double by 2026, according to financial analysts at NFU Mutual.
The Government estimates that £9.2billion in CGT reciepts will have been collected for the 2021/22 tax year, with this amount set to rise even further to £13billion the following year.
By 2026/27, Rishi Sunak is predicting the Government will collect £20billion in Capital Gains Tax receipts, according to the Office for Budget Responsibility (OBR).
With HM Revenue and Customs (HMRC) set to make so much from taxpayers thanks to this levy, many Britons look for ways to reduce their CGT bill.
CGT is levied on the profit placed on someone when they sell an asset that has substantially increased in value.
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The total amount of money someone receives from the sale is not taxed, it is instead the gain from the sale which is subject to HMRC.
An example on the gov.uk website states: “You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).”
It should be noted that some assets are considered tax-free and Capital Gains Tax does not need to be paid if anyone’s annual gains come under their tax-free allowance.
Sean McCann, a chartered financial planner at NFU Mutual, shared this theory as to why the Chancellor decided not to make any changes to CGT in his last Budget.
Mr McCaan said: “Despite concerns that Capital Gains Tax would be radically overhauled with higher rates to help repair the public finances, Rishi Sunak left it relatively untouched in his Budget.
“These forecasts – which suggest CGT receipts will more than double in five years – may have prompted the Chancellor to leave the tax alone.
“The projected increase is based on anticipated rises in equity prices in the coming years as the world bounces back from the Covid pandemic.
“This, combined with the impact of changes to Entrepreneurs’ relief in March 2020, which slashed the lifetime limit from £10million to £1million for those disposing of qualifying businesses, may have influenced the Chancellor’s decision.”
As part of his Autumn Budget, Rishi Sunak announced that the Government will double the time people will have to report and pay tax due on gains from residential property from 30 days to 60 days.
On this, Mr McCann added: “This is a welcome change which gives people more time to pay the tax after selling or gifting residential property such as holiday homes or rental property.”
For people looking for guidance on how to navigate their Capital Gains Tax bill, NFU Mutual shared how people can reduce the amount they pay.
One way people save is by making gifts to their spouses or civil partners, which are made tax free of CGT.
Shifting ownership of part of the asset someone is disposing of to a partner gives taxpayers two tax-free annual exemptions of £12,300, which means the first £24,600 of any gain will be tax-free.
Furthermore, if someone’s partner will pay a lower rate of CGT, it could be worth giving them a larger share of the asset before the sale is made, NFU Mutual said. This will allow households to pay a smaller rate of tax.
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