The OTS published their findings in November and made 4 key recommendations by referencing to four connected areas in which the government has policy choices to make.
One of the recommendations was to consider closely aligning Capital Gains Tax and Income tax rates.
Historically vendors benefited from the Entrepreneurs Relief to reduce the CGT. Entrepreneurs Relief was changed to Business Asset Disposal (BAD) rate earlier this year and with the recommendation from the OTS we are anticipating a change in the rate in the next Budget.
Whilst we wait to hear about final changes in the Autumn Budget, we have illustrated below the impact to the vendors if the BAD rate were changed from the current 10% to 40% - to align with income tax rates.
Whilst this is a worst-case scenario, we think that the current rate of 10% will change to a higher percentage – driven by the Governments requirement to generate additional income due to the impact on its finances from Covid.
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