Capital gains tax earnings decrease, set to surge following the Autumn Budget announcement

In the realm of financial policy, the topic of Capital Gains Tax (CGT) has been a subject of much discussion recently. Several experts have weighed in on potential changes to the tax, which could have significant implications for taxpayers.

Adrian Lowery, a financial analyst, has raised concerns about the prospect of imposing CGT on death, in addition to inheritance tax. This, he suggests, could result in a "double death tax" of more than 50%.

Shaun Moore, another financial expert, has warned that equalising CGT and income tax could lead to significant short- and long-term repercussions.

Chancellor Rachel Reeves has refused to rule out an increase in CGT, adding fuel to the speculation. For a basic or higher-rate taxpayer investing in stocks and shares, a potential increase in CGT would mean doubling the rate. For an additional-rate taxpayer, it's up 125%.

According to HMRC, CGT was paid on £80.6 billion of gains in the latest data. However, the number of people paying CGT dropped by 8% annually to 369,000. It's worth noting that most CGT comes from a small number of taxpayers who made the largest gains.

During the 2022/2023 tax year, the taxman collected £14.4 billion in CGT receipts, although this figure is down 15% from the previous year.

Laura Suter, a wealth management expert, advises making the best use of tax allowances and wrappers such as ISAs and pensions. One strategy she suggests is the "Bed and ISA" process, where you sell assets to reach the current CGT allowance of £3,000 and then re-buy them in an ISA.

Another strategy, known as a "Bed and Spouse and ISA", involves transferring assets to your partner to then put into their ISA if they haven't used their ISA allowance this year.

Interestingly, in the 2022/2023 tax year, 41% of CGT came from those who made gains of £5 million or more. Furthermore, 44% of CGT came from the 11% of individuals with taxable incomes above £150,000.

Analysts suggest that the chancellor could use her Budget to bring the CGT rate in line with income tax or to reduce the tax-free threshold further.

It's also worth noting that Capital Gains Tax (Kapitalertragsteuer) in Germany is paid by taxpayers who receive income from capital assets such as dividends, interest, or gains from the sale of securities. The tax is withheld automatically by banks at a flat rate of 25% plus solidarity surcharge and possibly church tax, but taxpayers can opt to have it assessed at their personal income tax rate under certain conditions.

In light of these developments, it's crucial for taxpayers to stay informed and consider their financial planning strategies carefully. By understanding the potential changes and taking proactive steps, individuals can better prepare for any adjustments to CGT.