The number of people paying capital gains tax since in the past 30 years has risen by 427 per cent, amid rumours the chancellor is planning to increase the tax in the Budget this autumn.
Latest CGT statistics from HMRC show since 1993-94 people paying the tax has risen from 90,000 to 369,0000.
This means tax revenue has surged from £60mn to £14bn.
In recent years, CGT allowances have been slashed from £12,300 to £6,000 in 2023 and falling to £3,000 from April 2024.
Chancellor Rachel Reeves has committed to not raising ‘headline’ taxes such as NI, income tax or VAT but has made no mention of CGT alongside IHT.
On the News Agents podcast this week Reeves told the hosts she would need to raise taxes in the Budget, which has caused some experts to question whether CGT could be in the firing line.
For the 2022-23 tax year, the total CGT liability stood at £14.4bn, realised on £80.6bn of gains.
Shaun Moore, tax and financial planning expert at Quilter, said: “While this marks a 15 per cent decrease in CGT liability and an eight per cent 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 £3.8bn 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.”
Laura Suter, director of personal finance at AJ Bell, thought the slight drop in the tax take this year was because fewer people were selling property and realising a gain.
“A slowdown in the property market during 2022-23 means that fewer people were selling their second homes or fewer landlords sold their properties compared to the previous couple of years. Because properties are larger assets, with often very chunky gains on them, they can significantly impact the figures,” she explained.
Suter also highlighted that the biggest group of CGT payers were aged 55 to 64, making up more than a quarter of all of those paying the tax.
Chancellor should ‘beware’
Although the CGT collected is still small compared to income tax, NI and vat, Tim Stovold, head of tax at Moore Kingston Smith thought it was still attractive for Reeves to try to “squeeze” more from those making gains.
“The Chancellor should be mindful that the CGT collected is heavily influenced by those making the largest capital gains. With so much tax at stake, leaving the UK to realise their
gains in a lower tax territory could start to look like an attractive option for people with the most to lose,” he warned.
