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Company founders and execs race to sell down stakes over anticipated capital gains tax hike

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The Office for Tax Simplification (OTS) proposals published this week could see the number of UK taxpayers subject to capital gains tax (CGT) triple, according to tax experts, who warn investors should be on “high alert” over the controversial plans, reported Investment Week.

The OTS plans could propose to the government to raise around £14bn for the public purse by cutting exemptions and doubling rates. The Chancellor asked the OTS, in particular, to ‘identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.’

In the 2017-18 tax year, £8.3 billion of Capital Gains Tax was paid, and £55.4 billion of net gains (after deduction of losses) reported by 265,000 individual UK taxpayers. This compares with £180 billion of Income Tax paid in that tax year by 31.2 million individual taxpayers.

Accountants being inundated with calls over ONS proposed capital tax gains hike

A review commissioned by Chancellor Rishi Sunak has recommended increasing capital gains tax rates to bring them in line with income tax rates, which could effectively double the cost of selling shares in companies, the Financial Times has reported.

Company founders and senior executives are preparing to sell down stakes in businesses ahead of a potential increase in capital gains tax next March. Some are contemplating selling their entire business.

Phone ringing off the hook

City brokers and accountants told the Financial Times that they had been “swamped with calls from senior executives with long term shareholdings as well as company founders” that have retained large stakes in their businesses and who fear being caught by higher taxes.

“Quite a few companies are asking us to find them a window to sell before March,” said one senior City financier, who added that some were worried about being tied by closed periods running up to results in the spring. 

If you are a basic rate taxpayer, then Capital Gains Tax is charged on gains at 10 per cent, then 20 per cent for higher and additional rate taxpayers. Income tax is charged at a basic rate of 20 per cent, rising to 40 per cent and 45 per cent for higher and additional taxpayers.

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