01 August 2024
If you are covering the latest Capital Gains Tax statistics from HMRC, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
“The latest capital gains tax (CGT) figures reveal a dramatic long term shift in the number of people paying the tax. Since the 1993-94 tax year, the number of people paying CGT has surged by an astonishing 427%, rising from 90,000 to 369,000 taxpayers. Correspondingly, the tax revenue has skyrocketed from £60 million to a staggering £14 billion.
“In recent years, CGT allowances have been slashed to help plug the fiscal blackhole the UK is suffering. The annual tax-free allowance for capital gains was cut from £12,300 to £6,000 in 2023 and fell to £3,000 from April 2024, impacting those looking to sell shares, other assets or second homes.
“While Rachel Reeves has committed to not raising headline tax rates, she has been tight-lipped on CGT. She has since conceded that tax changes might be necessary in the autumn budget to stabilise public finances.
“For the 2022-2023 tax year, the total CGT liability stood at £14.4 billion, realised on £80.6 billion of gains. While this marks a 15% decrease in CGT liability and an 8% drop in the number of taxpayers from the previous year, which may have been due to a combination of both heightened focus on CGT planning ahead of the allowance change, as well as the lower than usual returns on equities in 2022 due to the start of the Ukraine war and other economic challenges, the longer-term increase is stark.
“In the last decade alone, the government’s CGT tax take has more than tripled, rising from £3.8 billion in 2012/13. Given the data only accounts for the 2022/23 tax year, which was the final year before the CGT annual tax-free allowance was slashed, the amount of CGT paid and the number of taxpayers liable will likely climb much further going forward.
“Today, a significant portion of CGT comes from a small group of taxpayers making the largest gains. In 2022-2023, 41% of CGT was paid by those with gains of £5 million or more, a group that represents less than 1% of all CGT taxpayers. Additionally, 44% of gains for CGT-liable individuals came from the 11% with taxable incomes above £150,000.
“Regionally, London and the South East of England continue to dominate, accounting for around half of total gains and CGT liability.
“If CGT rates were aligned with income tax rates at the next budget, it could lead to significant short- and long-term repercussions. Without anti-forestalling measures, there could be a rush to sell second properties, temporarily boosting housing market activity and prompting investors to reconsider their portfolios.
“At this point, no changes have been announced. Therefore, making decisions based on potential future legislation is not advisable unless selling a second home or buy-to-let property is already part of your plan. These figures, however, highlight the potential for increased tax burdens in the future.”
