Report that Capital Gains Tax could rise

Reports on the BBC News website and in the Times and Daily Telegraph cover a report for the Treasury by the Office of Tax Simplification (OTS) that suggests the Chancellor could bring Capital Gains Tax (CGT) in line with income tax, and reducing the threshold at which the gains levy kicks in from £12,500 to £5,000. The Chancellor needs to find up to £40bn a year in public spending cuts or additional revenue raised - a daunting challenge for any chancellor.

Posted: 201112
The amount of tax levied on capital gains could be raised by billions of pounds according to a new report. About £14bn could be raised by cutting tax exemptions and doubling rates, according to the review which was commissioned by Chancellor Rishi Sunak. The main losers would wealthy people who own second homes or assets not shielded from tax. It comes as the Chancellor looks for ways to cover the enormous costs of the coronavirus pandemic. A concern for classic car enthusiasts is the possibility the scope of "assets" for capital gains tax (CGT) could be extended to include classic cars.
See BBC News report
What assets have capital gains tax exemptions or shielding?
Currently cars are considered to be depreciating assets and classic cars are not distinguished. There seem to be considerable problems in taxing classic cars which would have to be separated out from other cars to avoid CGT losses on mainstream cars arising. They could just take cars in the Historic class, but being in the historic class is optional now - if you do not take action to transfer into the Historic tax class then it does not happen, so perhaps they would take an arbitrary age, but that has its own difficulties as a value would have to be set for the date that it becomes taxable.

The value of a car, particularly a classic car, is highly subjective and owners could no doubt find someone prepared to value their vehicle quite highly, to establish a high baseline for any future sale or transfer when any capital gain might arise. Equally someone else might give a low value if it was transferred rather than sold. If a car is simply bought and sold when already taxable the situation is reasonably clear, but anything else is complicated. Then when money is spent on the car, is that expenditure for normal maintenance or improvements adding to the capital value? It's very likely Sir Greg Knight (chairman of the All Party Parliamentary Historic Vehicle Group) will point out the potential difficulties to Treasury colleagues, and is quite well connected. There could be a bit of a payoff between CGT and VED, if say cars became taxable assets at 25 years old, so on the basis that they are then classics there must an argument that 25 years is the age at which they should cease paying VED.

The most important exemption from CGT is of course is a property which is a main residence, but imposing a tax on that would be political suicide, although an annual wealth tax has been suggested from time to time by various Lib Dem MPs.

It's likely some tinkering might be done to the CGT rules, rather than the possibility of major changes involving classic cars.