New figures show the amount of capital gains tax collected by HM Revenue & Customs has skyrocketed.
Revenue received £14.3bn in CGT for the 2020-21 financial year, representing a 42% increase on the previous period.
The £14.3bn was paid by around 323,000 taxpayers, six times more than the 53,000 in 2019-20.
The period of increases coincided with many landlords being hit with additional costs and regulations, persuading an increasing number of landlords to sell their properties; the period was also marked by substantial increases in housing prices, which also increased CGT bills for owners.
There has been a huge increase in CGT paid per purchase to allow owners to exit the industry or at least shrink their wallets. Buy-to-let was cited as one of three reasons why UK CGT bills jumped 20% from £10.8bn to a record high of £12.9bn in the during the 12 months preceding the end of January of this year.
Other reasons include the reduction in Entrepreneurs Relief, which is costing some business owners millions in extra tax when they sell their stakes, and the stock market rally in 2021, when the FTSE 100 rose 42% from compared to its pandemic trough.
Shaun Moore, tax and financial planning expert at Business Consulting, says three factors are behind this latest massive increase in HMRC’s capital gains tax levies.
“First of all…there have been rumors that CGT rates will be aligned with income tax rates, making it much more attractive to dispose of assets before any changes. Obviously, this recommendation from the Office of Tax Simplification didn’t pass, but it was enough to scare people into advancing their disposals ahead of any potential tax grab. This recommendation is also likely to be shelved entirely until the next government decides what to do with income tax rates, as these appear to be firmly on the chopping block in order to help consumers.
“Perhaps the biggest issue is the tax freeze introduced by Rishi Sunak amid the pandemic. Last year the annual amount exempt from CGT was frozen at £12,300 until 2026 at the earliest, and with inflation soaring and benefits following drastically, more people will be sucked into the scope of the CGT.
“Finally, the reduction of the lifetime limit for the relief of disposal of commercial assets from £10m to £1m also continues to do its job, with just under 10% of the overall take from disposals eligible for this relief.”
Moore continues: “Inheritance tax got more attention than CGT in the recent Conservative leadership race, but the CGT tax eclipses it in comparison. Although tax hikes seem off the table for now, it wouldn’t be surprising to see CGT targeted if the next prime minister and chancellor feel they need to raise tax revenue without affecting the majority of the population. .
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