Out-Law News | 17 Nov 2022 | 4:03 pm | 1 min. read
Entrepreneurs and other business owners in the UK will be relieved that there will be no increase in the rate of capital gains tax (CGT) following today’s Autumn Statement, a tax expert has said.
Peter Morley of Pinsent Masons was commenting after the chancellor delivered his Autumn Statement (70 pages / 5.94MB PDF) to the UK parliament. It included a raft of tax rises and spending cuts amid a squeeze to the UK economy. He announced sweeping tax changes for individuals in an attempt to reduce the UK’s fiscal deficit.
The higher rate income tax threshold, above which people pay the 45% higher tax rate, is being cut to £125,140 from £150,000 from April 2023. The CGT annual allowance is being cut from £12,300 to £6,000 for the tax year 2023/24. Any gains above this amount will be taxable and will lead to an additional £1,260 of CGT for those paying at the 20% rate. The allowance will be reduced further to £3,000 from April 2024.
Morley said “for those making significant gains, the reduction will have no material impact and will largely go unnoticed. However, collectively it is expected to raise an additional £440m by 2027/28. The change is likely to be felt most by those making more modest gains, perhaps from employee share options.”
Aside from cuts to tax thresholds, the Autumn Statement contained few new tax announcements directly affecting entrepreneurs. However, the Treasury has announced changes to close a CGT tax “loophole” affecting non-UK domiciled individuals when selling shares in a non-UK business. Effective immediately, where a non-UK company is placed on top of an existing UK company, non-doms will no longer be able to claim the remittance basis of taxation on any gains made on the sale of shares in the non-UK company. Instead, the sale of shares will be treated as if the non-UK company were a UK company and therefore subject to CGT. The measure is expected to bring in an extra £830m in tax by 2027/28.
Morley said: “although the government has decided to maintain the non-dom tax regime, it’s interesting to see that the government is starting to make changes that will bring in more tax from non-doms. While the loophole that HMRC is closing today won’t affect a huge number of people, the amount of tax it is expected to raise over the next few years is quite significant.”