Following on from HM Treasury’s response to the Office of Tax Simplification (OTS) reviews into Inheritance Tax (IHT) and Capital Gains Tax (GCT), Julia Rosenbloom, tax partner at Smith & Williamson comments:
“The government has accepted five recommendations from the OTS’s second report on the technical and administrative issues relating to CGT in an attempt to provide some practical simplifications for taxpayers. Some of the agreed changes should be particularly welcomed, not least the confirmation from government that ‘the no gain no loss window’ on separation and divorce should be extended. At the moment, transfers between spouses are only tax neutral in the tax year of separation. While the government has agreed that this should be extended, we will have to wait for the outcome of a consultation to know to what extent people will be given extra time. This will, for many, reduce the CGT cost of getting divorced and give people a bit more time to sort out their financial affairs in such circumstances.
“However, overall, it is important to note that these responses from the government only largely concern acceptances or rejections on technical and administrative aspects of CGT. Crucially, this update gives no real steer on whether we might see an increase in CGT or other changes to the CGT regime.
“In the same response to the OTS, the government said it has decided not to proceed with any changes ‘at the moment’ to IHT. However, given the acknowledgement that IHT makes an important contribution to the public finances and is forecast to raise £6 billion in 2021-22 to help fund public services, it would be foolish to rule out any changes to IHT in the future. As we saw earlier this year, the government announced a surprise 1.25% increase in national insurance contributions and income tax on dividends from 6 April 2022, demonstrating it is not afraid of tax rises. This reinforces the potential for changes to personal taxes so individuals should continue to carefully consider their tax planning and make the most of current allowances before any further possible changes are introduced.”