Rishi Sunak, the Chancellor of the Exchequer, has proposed a new tax cut that will cost the wealthy £3,000 annually. The proposal is part of the government’s plan to boost the economy and create jobs in the wake of the COVID-19 pandemic.
The tax cut will be implemented through changes to the capital gains tax (CGT) system. Currently, individuals pay CGT on the profits they make when they sell assets such as property, shares, and businesses. The tax rate for higher-rate taxpayers is 20%, while basic-rate taxpayers pay 10%.
Under the proposed changes, the tax-free allowance for CGT will be reduced from £12,300 to £5,000. This means that individuals will pay tax on the first £5,000 of their capital gains, rather than the first £12,300. The tax rate for higher-rate taxpayers will remain at 20%, but the basic-rate tax will increase to 20% from 10%.
The government estimates that the changes will affect around 300,000 people, with the majority being wealthy individuals who own multiple properties or shares. The Treasury expects the tax cut to raise around £14 billion over the next five years.
Critics of the proposal argue that it will not achieve its intended goal of boosting the economy. They argue that the wealthy are unlikely to spend the extra money they save on taxes, and that the government would be better off investing in public services and infrastructure.
Others have raised concerns that the changes will discourage investment and entrepreneurship. They argue that the higher tax rate for basic-rate taxpayers will make it more difficult for small business owners and entrepreneurs to sell their businesses and reinvest the profits.
Despite these concerns, the government has defended the proposal, arguing that it will help to create jobs and stimulate economic growth. The Chancellor has also emphasized that the changes will only affect a small proportion of the population, and that the government remains committed to supporting those who have been hardest hit by the pandemic.
Overall, the proposed tax cut is likely to be a controversial issue in the coming months. While some will welcome the extra money in their pockets, others will argue that the government should be focusing on more pressing issues such as healthcare, education, and social welfare. Only time will tell whether the changes will have the desired effect on the economy, or whether they will simply benefit the wealthy at the expense of the rest of society.
