- Capital gains tax receipts hits £13.2 billion in January – the highest on record
- CGT receipts have risen 24% compared to January 2022
- Wealth tax crackdown plus Budget worries drive higher receipts
- Tips on how to beat the CGT hike
Laura Suter, head of personal finance at AJ Bell, comments on the latest capital gains tax data:
“The amount the nation is paying in Capital Gains Tax has hit a record high, with £13.2 billion paid in January alone thanks to the wealth tax. The Government has seen CGT receipts rise by 24% when compared to the previous January, as investors rush to lock in gains before the Chancellor’s tax crackdown hits in April.
“Typically, CGT receipts peak in the first three months of the year, as people use up their allowances and cash in gains before the end of the tax year. However, this year is shaping up to be a bumper tax-year end as people are wary of the cut to allowances in April and are also fearful of a further crunch on wealth taxes in the upcoming Budget.
“The Government has slashed the tax-free allowance for Capital Gains Tax, from the current £12,300 a year to £6,000 from April 6 and again to £3,000 from April 2024. It means many investors will be cashing in gains up to that limit before the tax year is over, as if you don’t use it you lose it. However, anyone just cashing in gains up to their tax-free limit wouldn’t incur CGT and so wouldn’t add to these figures.
“But many investors sitting on significant gains are likely to have cashed them in sooner, in the knowledge that the tax environment will be harsher come April. The exodus of landlords from the buy-to-let market will also contribute to these figures, as individuals sell second properties ahead of the April deadline.
“Other investors will be moving their investments into an ISA. This will have the triple whammy of using up their ISA allowance for this year and protecting the money from both dividend and capital gains tax in future years. Many investors will be happy cashing in gains above their current CGT allowance in order to funnel it into an ISA and protect it from future tax raids.
“Other investors who have already hit their ISA allowance may simply be realising gains in the current tax year in fear of the tax rates increasing in next month’s Budget. The Government’s recent ramping up of its tax take, but particularly with wealth taxes such as CGT and dividend tax, means investors are likely nervous of a further tax hit – whether that’s more cuts to allowances or an increase in tax rates.
“Anyone still sitting on gains who hasn’t used up their ISA allowance this tax year should consider moving the investments into an ISA. By using a ‘Bed and ISA’ service, you can realise gains up to the current CGT allowance and instantly buy them back in your ISA. If your gains are higher than your allowance, you could transfer assets to your spouse so they can use their CGT and ISA allowances. Transfers to spouses are exempt from CGT, but if they then sell the assets they’ll face CGT on any profit between what you bought the investment for and what they are selling it for. If you transfer assets to them, they can then cash in the gains and use their annual allowance to avoid a large tax bill.”
Source: HMRC
