A number of landlords have responded to the government squeezing their returns by selling their assets, triggering an 18.6% increase in CGT payments.
The latest data released by HM Revenue & Customs revealed the CGT tax take hit a record £9.2bn in the 2018-19 financial year, up from £7.8bn in the previous 12 months.
CGT applies to gains made from the sale of assets such as second properties and stocks and shares.
All taxpayers have an annual CGT exemption of £12,000. Above this amount, lower-rate taxpayers pay 10% on capital gains and higher and additional rate taxpayers pay 20%.
But people selling additional properties pay CGT at 18% if they are a basic rate taxpayer or 28% if a higher or additional rate taxpayer.
Capital gains are traditionally taxed at lower levels because of the investor risk, whereas employment income and savings interest are generally more guaranteed.
However, the IPPR believes that CGT rates on investment sales, second homes and buy-to-lets should be increased to income tax levels.
The influential think-tank also proposes that the annual exempt allowance of £12,000 should be reduced to just £1,000. Under its plans, a basic rate income tax payer would face a CGT hike to 20% from as low as 10%.
Meanwhile, higher and additional rate taxpayers would see CGT rates jump to 40% and 45%.
Savers and investors could be slapped with an additional £120bn in tax over five years under the major overhaul of CGT.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, told the press: “The IPPR wants the government to ramp up the tax on savers and investors – both on the gains they make and any income they receive.
“It underlines how tax allowances and rates can change overnight, and the importance of wrapping as much of your savings and investments in Isa wrappers as possible - to help protect your money from tax, regardless of any policy change.
“The think-tank says its proposals are fairer than the current system. It underplays the fact that in reality, the vast majority of savers and investors pay tax on their income from work, they save and invest diligently for their future, and may pay a second round of tax on their investment income or gains.”
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