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Capital gains tax (CGT) has always been a topic of significant interest in the UK, particularly as political parties discuss potential reforms. With Labour Party proposals in recent years suggesting changes to capital gains tax, many are wondering what Labour’s capital gains tax reform might look like and how it could affect both individual and business finances. At Stan Lee Accountancy, we aim to keep our clients informed about any potential tax changes that could impact their financial planning.
Capital Gains Tax (CGT) is a tax levied on the profit you make when selling an asset that has increased in value. The tax is applied to the “gain” made rather than the total sale price of the asset. Typical assets subject to CGT include property (except for your primary residence), shares, businesses, and valuable personal possessions worth over £6,000.
As of now, the rates for capital gains tax depend on your income tax band. If you’re a basic rate taxpayer, you pay 10% on your gains. However, higher and additional rate taxpayers are charged 20%. For gains on residential property, these rates rise to 18% and 28% respectively.
There are also allowances and reliefs available, such as the annual CGT allowance, which currently stands at £6,000 (for the 2023/2024 tax year), and business asset disposal business asset disposal relief, which can reduce the tax you pay on certain business gains.
Labour has consistently suggested that reforms to CGT would be on the agenda if they came into power. One key proposal from Labour is to align capital gains tax rates more closely with income tax rates, meaning individuals could pay as much as 40% or 45% CGT, depending on their income. This could significantly impact higher earners and those selling high-value assets such as second homes or investment properties.
Labour’s rationale is that the current system disproportionately benefits wealthier individuals, particularly property investors and shareholders, allowing them to pay less tax on gains than they would on income.
If Labour’s capital gains tax proposals were to be implemented, they would potentially have a substantial effect on individuals and businesses alike. For example:
It’s worth noting that while Labour has expressed its intention to reform CGT, these changes are not yet set in stone and would depend on them coming into power and passing the necessary legislation.
At Stan Lee Accountancy, we recommend that individuals and business owners stay informed and proactive in their tax planning. Here are a few steps to consider:
With potential Labour capital gains tax reforms on the horizon, it’s essential to stay informed and plan ahead to minimise your tax liabilities. At Stan Lee Accountancy, we specialise in providing expert advice on CGT and other tax matters. Whether you’re a property investor, business owner, or individual with assets, we can help you navigate these changes and maximise your financial outcomes.
Contact us today to book a consultation and let our experienced accountants guide you through the complexities of capital gains tax and tax planning.
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