Sean McCann, Chartered Financial Planner at NFU Mutual, said that after hiking National Insurance contributions last month the Chancellor may now turn his focus to wealth taxes in order to raise cash to pay for the Government’s stimulus packages during the Coronavirus pandemic.
He said: “Increasing CGT rates to align with Income Tax could be positioned as levelling the playing field following the recommendation to do so by the Office of Tax Simplification last November.
“The Chancellor may also look to reduce the annual tax-free capital gains exemption from £12,300 which would result in more people paying the tax.
“The OTS estimated that halving the annual exemption to £6,000 would result in 235,000 more people paying CGT each year and would generate £480m in the first year. Reducing the annual exemption to £2,500 would result in 360,000 more people paying and would generate £835m in the first year.”
Other measures that Mr McCann expected the Chancellor to consider include an inheritance tax grab on pensions.
Earlier this year the Chancellor froze inheritance tax allowances for five years.
Mr McCann said that Chancellor Rishi Sunak could raise significant sums for the Treasury by making pensions liable for inheritance tax.
He said: “If Mr Sunak wanted to cast his net further, he could make the bold decision to make pensions liable for inheritance tax, raising significant sums in the process.
“Currently the value of pension funds left on death are normally free of inheritance tax. For those that have other sources of income in retirement, it can make sense to leave their pension funds untouched to maximise the amount they can leave free of IHT.
“In order to soften this blow, the Chancellor could make life insurance policies exempt from inheritance tax, something the OTS has recommended. This would save families hundreds of millions of pounds as latest figures show more than 6,000 estates paid inheritance tax on insurance policies worth over £700m in 2018/19.”
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