Taxman takes record £14bn in Capital Gains Tax
The number of people liable to pay the tax, charged on gains made between the purchase of property or financial assets such as shares, rose from 53,000 to 323,000 over the same period.
The Office for National Statistics said the significant uptick in CGT paid could reflect individuals opting to dispose of capital assets ahead of a mooted change in tax rules that could have seen the tax aligned with income tax rates.
However, the recommendation from the Office of Tax Simplification was not enacted.
In the 2020/21 tax year, 47% of gains for CGT-liable individuals came from the 13% with taxable incomes above £150,000, the additional rate threshold for income tax.
Some 8% of CGT came from disposals that qualified for Business Asset Disposal Relief (BADR), which was claimed by 47,000 taxpayers on £11.9bn of gains in the 2020/21 tax year.
From 11 March 2020, the lifetime limit for the relief was reduced from £10m to £1m.
The ONS report stated: “As a result, both the amount of gains on which the reliefs were claimed on, and the amount of tax charged at the 10% BADR rate decreased by 60% between the 2019 to 2020 and 2020 to 2021 tax years.”
As in previous years, London and the South East of England combined account for around 40% of CGT taxpayers and approximately half of total gains and liability for the 2020/21 tax year.
The average bill in 2021/20 was £44,316 per CGT taxpayer, up from £37,289 in 2019/20.
More people will fall within the scope of the tax
Shaun Moore, tax and financial planning expert at Quilter, said former chancellor Rishi Sunak’s decision to freeze the annual CGT exempt allowance at £12,300 until 2026 at the earliest means even more people will be dragged into the scope of CGT over the next four years.
“Despite the challenging macroeconomic backdrop, asset prices have still risen since this data was collected and as such this tax take is unlikely to stay a record for long,” Moore said.
“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.”
Alex Davies, chief executive of Wealth Club, said: “CGT charged on the profit from the sale of a business, shares and investments, second properties and family heirlooms is a great cash cow for HMRC.
“This year’s take is a steep increase on the amount received in the previous year, which is put down to media speculation about changes to CGT rules, policy changes affecting eligibility for certain reliefs, and also to a lesser extent, an increase in the number of buy-to-let disposals as a result of the change in tax rules.”