U.K. tax authorities freeze capital gains tax signaling short term victory

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U.K. tax authorities freeze capital gains tax signaling short term victory for crypto investors
U.K. crypto investors braced themselves for significant changes in the treatment of Capital Gains Tax (CGT). But these fears were ill-founded as Chancellor Rishi Sunak delivered his budget just after noon today.

The government opted to freeze thresholds for Income Tax, Inheritance Tax, Pensions Allowance, VAT registration, and Capital Gains Tax.

While this is welcome news at face value, some analysts say this is a back-handed move to raise taxes on the “wealthy” over the long term.

Sunak freezes CGT threshold allowance until 2026
In the run-up to today’s budget, reports of dramatic changes to CGT were making the rounds. This included talk of a rate hike from 20% to 40% for higher rate taxpayers. And reducing the CGT allowance from £12,300 ($17.2k) to as low as £2,000 ($2.8k).

However, this proved unfounded as Sunak presented his Spring budget. Instead, the Chancellor opted to freeze the CGT threshold at £12,300 ($17.2k) until 2026. At the same time, no mention of a rate hike was made.

“I will also maintain, at their current levels, until April 2026: The inheritance tax thresholds, the pensions lifetime allowance, the annual exempt amount in capital gains tax and, for two years from April 2022, the VAT registration threshold.”

Freezing allowances is a backhanded stealth tax
The general response from crypto investors is one of relief. One Reddit user expressed a cautious liking to the outcome, especially regarding rates staying the same. However, they pointed out the allowance freeze is a stealth tax for long-term holders.

“I think this is good, There was a lot of concern the taxable percent may increase directly and as of yet that doesnt seem to be the case. A freeze on personal allowance till 2026 is a stealth tax but for those wishing to sell this year this is a good outcome.”

Becky O’Connor, the Head of Pensions and Savings at Interactive Investor, offered her professional opinion by saying the allowance freeze is a wealth tax by another name. She said inflation would increase the number of people pushed above the threshold.

For those who decide to build assets, the allowance freeze will result in higher tax bills for more people in the coming five years. O’Connor said normal earners and diligent investors would be treated the same as today’s wealthy, to put it succinctly.

‘Freezing allowances is a back-handed way of raising taxes, as wage inflation and asset price inflation increase the number of people pushed over the thresholds at which they have to pay more tax.

Nonetheless, today’s budget could have been much worse for crypto investors. And with no increase in the CGT rate, at least short-term investors are happy.

Genesis: https://cryptoslate.com/u-k-tax-authorities-freeze-capital-gains-tax-signalling-short-term-victory-for-crypto-investors/