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Current Capital Gains Tax process will stay as it is for the time being as the government's HM Treasury responds in letter to the OTS.

The Office of Tax Simplification has been lobbying for the past 18 months with recommendations on how the implementation of the Capital Gains Tax could be improved, such as increasing CGT rates closer to those for income tax and lowering the CGT allowance.

At the moment, CGT – the tax that is paid on the profit of the sale of any additional home – stands at 18 per cent for basic rate taxpayers and 28 per cent for those in the higher rate threshold. There is an annual allowance of an initial £12,300 on which no CGT is paid.

The Office of Tax Simplification wanted CGT to increase in line with income tax rates to 20 per cent at the basic rate and 40 per cent at the higher rate, while at the same time reducing the initial amount exempt to just £2,000.

Lucy Frazer MP, financial secretary to the Treasury, said: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC. The government will continue to keep the tax system under constant review to ensure it is simple and efficient. Your report is a valuable contribution to that process.”

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