31 January 2024
On the 31st January deadline to pay any reported Capital Gains Tax (CGT) bills, new Freedom of Information data collected by Quilter, the wealth manager and financial adviser show that HMRC’s Real Time Capital Gains Tax Service data is barely being used.
HMRC’s Real Time Service was introduced in 2017 and is accessed by logging in to your personal tax account and entering information when prompted.
The claimed advantage of the system is the opportunity to report the gains as they happen, and then not have to fill out Self-Assessment. However, you are then required to pay any CGT as you report it.
The new data shows that in the tax year 2022/23, the Real Time Service recorded only 2,602 disposals creating a total of £7,386,380 in tax paid. As a percentage, this is just 0.04% of the total CGT amounting to over £18.1bn collected by the UK government. The data also shows that the service has been steadily declining in usage.
|
Year |
Total Disposals Recorded |
Total CGT Paid (£) |
Average Tax Paid per Disposal (£) |
Total CGT Collected by UK Govt (£) |
|
2022-2023 |
2,602 |
£7,386,380 |
£2,839 |
£18.1bn |
|
2021-2022 |
3,631 |
£46,071,310 |
£12,688 |
£15.3bn |
|
2020-2021 |
3,060 |
£29,081,407 |
£9,504 |
£11.1bn |
|
2019-2020 |
4,998 |
£33,741,009 |
£6,751 |
£9.8bn |
|
2018-2019 |
4,918 |
£30,050,961 |
£6,110 |
£9.2bn |
|
2017-2018 |
4,034 |
£23,274,285 |
£5,770 |
£7.8bn |
In light of the impending changes to the CGT regulations more and more people will need to report gains through either Self-Assessment or use this service. With the annual exempt amount (AEA) for CGT set to decrease further to £3,000 for individuals from April 2024, following a reduction to £6,000 in 2023, the necessity for public awareness and understanding of the available reporting services becomes increasingly crucial.
The reduction in the AEA is expected to increase the tax burden on a larger group of taxpayers. This is particularly significant for higher and additional rate taxpayers with gains on residential property, who could face a steep increase in their tax bills. Moreover, with an estimated 260,000 new individuals and trusts anticipated to fall within the scope of CGT by 2024-2025, there is a potential risk of these new taxpayers being unaware of their tax obligations and the options available for reporting.
David Denton, technical consultant at Quilter Cheviot said:
“The data's implication is clear, there is a substantial gap in awareness of the Real Time Capital Gains Tax Service.
“The new lower CGT allowance will inevitably increase the number of taxpayers needing to report gains meaning there is a real need for the public to become aware of what they are required to do and how they can do it.
“The underutilisation of HMRC’s Real Time Service is a significant missed opportunity for efficient tax reporting without the need for full self-assessment. The government faces an urgent need to enhance the visibility of this service and provide clear, accessible guidance on its use. This is essential to ensure that taxpayers, particularly those navigating CGT for the first time, can fulfil their obligations with ease and confidence.”
