26th
Aug 2022
Latest figures shows the seismic increase of Capital Gains Tax receipts into HMRC’s coffers.
During the financial year 2020 – 21 HMRC raked in £14.3 billion which was up by 42% from the previous year.
All in all around 323,000 taxpayers contributed towards the £14.3 bn - six times as many as the 53,000 during 2019-20.
The period’s increase via CGT occurred at the same time as many landlords had to deal with the rise in regulations and of course extra costs incurred, this resulted in many having had enough by selling up or reducing portfolios and taking advantage of the huge house price rises which further inflated HMRC coffers through CGT.
Buy to Let was one of the three major contributory factors why CGT revenue soared by 20 per cent from £10.8bn to the highest record ever of £12.9bn in the 12 months leading to the end of January this year.
Other reasons for the ‘surfeit’ was the reduction in Entrepreneurs Relief as some business owners had to pay millions in extra tax when selling their stakes, there was also the stock rally in 2021 when the FTSE rose by 42 per cent after the pandemic disaster.
Shaun Moore, tax and financial planning expert at a business consultancy, explains the three main factors swelling CGT receipts, said. “Firstly … there were murmurings of CGT rates being brought in line with income tax rates, making it much more appealing to dispose of assets ahead of any change. Clearly this recommendation from the Office of Tax Simplification did not get enacted, but it did enough to spook people to bring forward their disposals ahead of any potential tax grabs. This recommendation is also likely to be entirely shelved until the next government decides what it is going to do with income tax rates as these seem firmly on the chopping block in order to help consumers.
“The more prominent issue is perhaps the fiscal freeze introduced by Rishi Sunak in the middle of the pandemic. Last year the CGT Annual Exempt Amount was frozen at £12,300 until 2026 at the earliest, and with inflation spiking and allowances following drastically behind, more people will be dragged into the scope of CGT.
“Finally, the reduction in lifetime limit for Business Asset Disposal Relief from £10m to £1m continues to do its job too, with just under 10% of the overall take coming from disposals that qualified for this relief.”
Moore added: “Inheritance tax has been getting more attention than CGT in the recent Conservative leadership contest, but the tax raised from CGT dwarfs it in comparison. While tax rises do seem off the cards for now, it would not be a surprise to see CGT targeted if the next Prime Minister and Chancellor believe they need to raise tax revenues without impacting the majority of the population.”
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