Earlier this week, the Chancellor issued his long-awaited response to the Office for Tax Simplification’s (OTS) reports on Inheritance tax (IHT) and Capital Gains Tax (CGT).
The headline is that the recommended overhaul of IHT will not take place. Whilst this should be welcome news for business owners who rely on valuable IHT reliefs such as Business Property Relief and Agricultural Property Relief, it also means that there will be no simplification of the rules for IHT on lifetime gifts which others were hoping for, and the current inconsistencies in how IHT reliefs apply and interact with other taxes will not be addressed.
Capital Gains Tax
On the CGT side, the Chancellor’s response is not quite as categorical. Although large scale change to the operation of CGT reliefs is not imminent, the Government has accepted some recommendations to mainly technical and administrative issues which they are taking forward. There is welcome news that CGT reliefs may be relaxed for separating or divorcing couples, but the detail is yet to be confirmed.
And finally, it’s worth highlighting one or two points that are not addressed in the Treasury letter, in particular the rate of tax applicable. It is notable that there are no comments on aligning CGT with Income Tax rates, which the OTS included in their report. So, although CGT reliefs may not immediately change, the prospect of potentially higher CGT rates is not ruled out.
As always, it is worth keeping your existing assets and tax planning under regular review to ensure they are still appropriate for your circumstances. If you would like our help with this, please speak with your usual Sagars contact or email Gunhild Dam