CGT is levied on profits banked when selling assets at a profit, including shares and other investments held outside of a tax-free Isa, as well as paintings, antiques and jewellery, and buy-to-let or holiday properties.
There is no CGT when selling UK government gilts and Premium Bonds, and betting, lottery or pools winnings.
Currently, basic rate taxpayers pay CGT at 10 percent, rising to 20 percent for higher-rate taxpayers.
These rise to 18 percent and 28 percent respectively, when selling an investment property or second home.
These tax bands will continue to apply, but from April they will kick in much sooner.
CGT is an attractive tax to increase from a political point of view, because only 323,000 paid it last year.
Yet there is a downside.
Most CGT comes from a small number of taxpayers who bank large gains, but those who make gains of a few thousands pounds will be hit hardest by Hunt’s move, said Paul Barham, partner at Mazars.
“Cutting CGT allowances will mean that even the most modest of gains could become taxable.”
In another blow, many “smaller” savers hit by the tax will be forced to complete a tax return self-assessment tax return, said Stephen Hughes, financial planner at Charles Stanley. “Potentially, that’s a lot of admin for a small amount of tax for HMRC.”
Hughes said the CGT threat makes it even more important to invest in shares inside your £20,000 tax-free Isa allowance, as there is no CGT to pay on gains.
Anyone with non-Isa shares or investment funds could consider using their £12,300 CGT allowance to sell them this year without paying tax. They could then buy them back within an Isa, to protect future gains.”
CGT is not charged on the interest paid by standard cash savings accounts, so that’s not a concern.
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