As announced recently, Rishi will once again stand up and give an Autumn budget on 27 October 2021, alongside the spending review.

So, what changes can we expect. Obviously, the books are in a bad way and funds are needed to recoup the support that has been given during the pandemic.

We have recently seen the announcement of the increase in dividend tax and National Insurance by 1.25% with effect from 6 April 2022 and the “ health and social care levy” – see my blog of 16th September, although this was more driven by the need to get funds to try and resolve the social care agenda, as opposed to necessarily raising funds to balance the books.

An obvious and easy tax to target, to raise the much-needed funds, would be capital gains tax. There is much speculation that the rates of capital gains tax will be aligned to income tax rates. With income tax rates currently at either 20%/40%/45% for non-savings and savings income and divided income at either 7.5%/32.5%/38.1%, capital gains tax is favourable at either 10%/20% for non-residential gains and 18%/28% for residential property disposals. Currently, therefore, there is an incentive for people to reclassify income as capital gains, so achieving in most cases tax at a lower rate.

The above recommendation was included in the first report that the office of tax simplification was asked to undertake back in 2020, and since then a second report has been published, which although there was no further mention of any changes to the rate of tax, there were various recommendations. Most of these were practical changes such as extending the 30 day deadline for residential property disposal reports to 60 days and making it compulsory for estate agents or solicitors to provide information to their clients when making a property sale about the reporting requirements and relevant timescales, using HMRC produced documents.

However some would impact on the actual calculation of the gain and therefore the tax payable such as extension to the period of time assets can be transferred between a couple when they are are separating without creating a capital gain or loss and to bring fairness to the currently different tax treatments between someone who sells part of their garden for development and someone who chooses to split their land to build a new house to live in, with the intention of selling the original house.

Therefore, I think given the fact that the treasury has asked for and received two reports from the office of tax simplification, capital gains tax is high on the agenda for review and I would be surprised not to see it mentioned in the upcoming budget.