In the last tax year, a staggering £16.7bn in capital gains tax (CGT) was raised, marking a significant increase in revenue. This blog post delves into the details of this record-breaking achievement, shedding light on the factors contributing to this surge and its implications for taxpayers. Join us as we explore the key insights surrounding the notable rise in CGT collections.
Growth in Revenue
The total amount of Capital Gains Tax paid in the UK witnessed a remarkable jump of over £2bn in just a year, soaring from £14.3bn in the previous year to a staggering £16.7bn.
This significant increase highlights the substantial growth and financial activity within the market, reflecting the dynamic nature of the economy.
Increased Taxpayer Liability
A significant increase in the number of individuals selling residential property resulted in a total of 394,000 taxpayers being liable for CGT. This rise in liability highlights the growing trend in property transactions and the potential impact on tax obligations.
Reasons Behind the Surge
According to the latest report from HMRC, the notable increase in CGT collections can be attributed to several factors. Firstly, there has been a significant surge in gains realized from various investments and assets.
Additionally, the overall tax amounts generated from CGT have risen substantially due to the higher rates and broader scope of taxable transactions. Lastly, the number of taxpayers disposing of residential property has also contributed to the escalation in CGT collections. These combined factors highlight the growing importance of CGT as a source of revenue for the government.Impact of Interest Rates
High Net Worth Individuals & Companies
A significant portion of the tax revenue, almost half, was contributed by the top 45% of high net worth individuals and companies who achieved substantial gains of £5 million or more.
Business Asset Disposal Relief
7% of CGT collections were derived from disposals eligible for business asset disposal relief (BADR), previously known as entrepreneurs relief. This change followed the removal of the £10m lifetime limit for gains in March 2020, which was replaced by a significantly lower £1m limit.
Strong Results for the Treasury
‘CGT receipts have delivered another bumper year for the Treasury,’ Toby Tallon, tax partner for Evelyn Partners, stated. ‘As things stand, we expect to see CGT receipts increase further given additional restrictions due to come into force.
‘From this tax year there is a sharp reduction in the annual exemption to £6,000 and it is due to halve again to £3,000 from 2024/2025 onwards. These changes will drag more individuals into the net for CGT.
‘From speaking to our clients and recent research we conducted amongst business owners, we know that many are concerned that the tax regime could become even more restrictive and are accelerating the sale of assets before any potential tax changes, such as a possible increase in the rate of CGT.
‘No changes to the rate of CGT have been proposed as things stand, but the outlook for CGT post the next general election remains uncertain at this stage.
‘For now, in the determination of key strategic priorities the government is likely to accept that it cannot do everything, which could imply that major tax reforms, including to CGT, are off the agenda.’
The recent surge in capital gains tax collections has set a new record, with £16.7bn raised in the last tax year. This achievement highlights the increasing importance of understanding the intricacies of CGT for taxpayers, especially those involved in property transactions. Stay informed and prepared by keeping up with the latest developments and expert advice from our STS Europe.