Rishi Sunak is mulling an overhaul of capital gains tax as he explores whether the current system is fit for purpose.

The chancellor has today commissioned a review of CGT in relation to individuals and smaller businesses, asking the Office of Tax Simplification to consider the overall scope of the tax and the rates which apply. It will also look at the reliefs, exemptions and allowances which apply to the gains tax.

Mr Sunak has already slashed entrepreneurs’ relief, limiting the allowance to £1m at his debut Budget in March, but other benefits — such as the principal private residence relief, which means consumers are not taxed on their main home, and the ISA exemption — fall into the scope of this review.

The chancellor was also keen to ascertain the relationship between CGT and other parts of the tax system, in particular how gains are taxed compared to other types of income.

The move comes after Mr Sunak put forward £30bn worth of policies and tax cuts, including a stamp duty holiday and VAT reductions, in his summer statement.

It is likely the chancellor is looking at ways to raise cash in order to balance the books as hundreds of billions of pounds is spent on keeping businesses and households afloat amid the virus crisis.

CGT is a modest source of revenue for the exchequer, bringing in just £8.8bn in 2017-18, which the OTS said was equivalent to an average 15 per cent tax rate.

Capital Gains Tax is levied on the profit made when an asset that has increased in value is sold.

Some assets — such as ISAs, UK government gilts, your main home and lottery winnings — are exempt from the tax.

Higher and additional rate taxpayers are charged 28 per cent on property and 20 per cent on other chargeable assets.

The rate charged on basic rate taxpayers, either 10 per cent or 20 per cent for non-property assets and 18 per cent or 28 per cent for property, depends on the size of the gain, the amount of taxable income earned and what type of asset has been sold.

In its call for evidence, the OTS said there had been “several changes to CGT” over the last 10 years and that it “may be helpful to consider the tax again in the current climate”.