The tax impact of COVID-19

Proposals include:

– The possible alignment of CGT rates with income tax

– Measures against the retention of profits in small companies to extract as capital when ceasing, rather than taking dividends during a company’s lifetime

– Taxpayers not benefiting from both an Inheritance Tax exemption and CGT uplift when someone dies.

Currently, there are four rates of CGT. Basic rate income tax payers pay 18% on second homes and buy-to-lets, and 10% on other assets. While for higher rate taxpayers, the rates are 28% and 20% respectively.

Landlords may be set to make the biggest losses under the proposals, however they may be best positioned to hold on to their buy-to-let properties once these measures are put into place, rather than incur a CGT charge by selling up.

Alternatively, we may see a surge in landlords selling properties before the changes come into play. Each individual’s circumstances will be different.

The report has also called for the government to reduce the annual CGT allowance, or annual exempt amount – which currently means the first £12,300 of gains from assets such as shares and property are free of CGT.

This could reduce to between £2,000 and £4,000.