Record capital gains means £8.8bn tax bill
Brits paid £8.8bn in capital gains tax (CGT) in the tax year 2017-18, up 14 per cent from the previous year.
Figures from HMRC show that in 2017-18 chargeable gains for CGT were £57.9bn, an increase of 13 per cent on the previous year, while CGT liabilities were £8.8bn, up 14 per cent on the year before.
The number of CGT taxpayers increased by 3 per cent to 281,000 but most CGT revenues came from a relatively small number of taxpayers. Nearly two-thirds (62 per cent) of CGT came from those who made gains of £1m or more – this group generally represents around 3 per cent of CGT taxpayers each year.
The HMRC figures suggested that people paying CGT are most likely to be aged 55 to 64, followed by those aged 65 to 74.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Last year was a bumper year for investors, who saw record capital gains on their share sales. Unfortunately, when the sun shines on investors, there’s always the risk it will be blotted out by the dark cloud of a substantial capital gains tax bill.
“The silver lining to this particular cloud is that for many investors, CGT is completely avoidable. By investing through an ISA, you can be certain that however your investments grow in future, you’ll never pay a penny of capital gains tax on them. And with an ISA allowance of £20,000 this year, over time you can build a sizeable tax-free portfolio.”
Hagreaves Lansdown suggests that if you have investments outside an ISA, you can still protect much of it from tax, by using the “Bed & ISA” process to sell them and rebuy them within the ISA wrapper. The most tax-efficient way to do this is to sell your investments to make just under the CGT threshold (£12,000 this year), so there’s no tax to pay now, and none in the future.
Married couples can get double the benefit, with a £40,000 ISA allowance between them. They can also transfer assets without triggering a tax bill, so can make gains of £24,000 between them before any tax is due.