Jeremy Hunt is being implored to “protect” peoples’ retirement savings with reform to capital gains tax in the upcoming Spring Budget.
The Chancellor will outline the Government’s fiscal agenda on March 6 with experts suggesting tax cuts could be on the agenda.
Capital gains tax, which is charged on the profit someone makes when selling an asset, could be on the agenda due to the “particular risk” pensioners face in paying for it.
In 2022, Mr Hunt confirmed the levy’s tax-free allowance would be slashed from £12,300 to £6,000 with another cut to £3,000 set to take affect from April 6, 2024.
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Capital gains tax reform could be on the agenda next week in Jeremy Hunt’s Budget
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Due to these changes, households selling or disposing of an asset could be hit with a tax penalty which they otherwise would not have paid a couple of years ago.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, highlighted that those approaching retirement “tend to build assets” which are vital for income and lump sums.
She explained: “As a result, the slashing of the allowances for both last April has already hit this group hardest, and the cuts set for this April are set to do even more damage.
“The Government has an opportunity to stop these cuts in their tracks – avoid the capital gains tax allowance falling to £3,000 – something we haven’t seen for 40 years, and stop the dividend tax cut to £500 – a tenth of the original allowance.
“It would help protect investors who have been doing the right thing for decades, to protect themselves in retirement.
“It would also encourage younger investors to get stuck in – without the first of major tax bills further down the line.”
Capital gains tax is a levy on the profit someone makes when they sell something that has increased in value. The gain is what is taxed, not the amount of money that is received.
It is also charged on taxpayers if they move assets outside of their estate to either a person or a trust.
Britons approaching retirement are losing money to tax charges when selling assets
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According to Government figures, the tax-free allowance cut from £12,300 to £3,000 over the last two years will push 260,000 across the capital gains tax threshold for the first time.
For the 2010/11 tax year, only 188,000 taxpayers paid the levy with the total amount being £4.23billion, The Telegraph reports.
However, for the 2024/25 tax year, this amount is expected to increase to 570,000 who is pay an estimated amount of £18billion in capital gains tax on gains made.
Jeremy Hunt will announce any tax reform changes in the Budget next week.
