- Capital Gains Tax (CGT) receipts hit £14.4 billion in 2022-23 with 369,000 people stumping up to pay the tax
- This equates to more than double the number of people who paid CGT 10 years ago
- A lull in property sales partly responsible for reduced figures
- Figures come amid speculation that Rachel Reeves could have CGT in her sights at the October Budget
- What investors can do to protect their gains
Laura Suter, director of personal finance at AJ Bell, comments on the latest HMRC Capital Gains Tax statistics:
“With rumours rife that the new chancellor is eyeing up increases to Capital Gains Tax, the latest figures highlight how lucrative the tax is. A total of £14.4 billion was paid in the tax in 2022-23, the latest figures available, with almost 370,000 people having to stump up the money.
“While there was a slight drop in the number of people reporting capital gains in the latest data, the trend is still very much up over the years. Compared to 10 years ago there are more than double the number of people reporting capital gains, with almost four times the amount of tax being paid. During this period we’ve seen the tax-free allowance slashed and certain other reliefs chopped.
“One reason for the drop in the tax take this year is that fewer people are selling property and realising a gain. The latest figures, for 2023-24, show an 18% drop in the number of people reporting gains for property and a 21% drop in the total tax paid. 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.
“It’s no surprise that older people are more likely to be locking in gains and paying tax on their returns. The biggest group of CGT payers are aged 55 to 64, making up more than a quarter of all of those paying the tax. They will have had a longer time to accumulate investment or property wealth, as well as being a likely age to sell their business before retiring and realising a gain on it. The number of people reporting gains peters out once people hit the age of 75, partly because there are few people in this age group and partly because the fact that CGT is wiped out on death means there is an incentive to hold on to assets in later life.
“The CGT exemption for a person’s estate once they die is another area that could look tempting for the chancellor. Currently any capital gains are wiped out when someone dies, to avoid double taxation of both CGT and inheritance tax. But paring back or even abolishing this tax perk could be a big revenue raiser for the chancellor.”
How can investors protect their gains?
“There is already a lot of speculation about Capital Gains Tax ahead of the October Budget, following the chancellor’s admission that taxes will have to rise. While investors should avoid panicking and locking in gains at current tax rates purely based on speculation, they should consider whether there is merit in moving their assets into a tax-efficient environment. If they have investments with capital gains outside an ISA or pension they can sell sufficient assets to reach the current CGT allowance of £3,000 and then re-buy them in an ISA – through a process known as a Bed and ISA. It means that they won’t pay tax on future gains and they are using up this year’s CGT allowance. You just need to make sure you have some of your £20,000 ISA allowance remaining.
“Equally, you could move some assets to your partner. If they are not making use of their capital gains allowance, you could move assets to them to benefit from their tax-free limits. If they haven’t used their ISA allowance this year, you could transfer assets to them to then put into their ISA – known as a Bed and Spouse and ISA.”
How CGT take increased over a decade:
Source: HMRC/AJ Bell
Number of CGT payers surges:
Source: AJ Bell/HMRC (total includes individuals and trusts)
