New figures show that the amount of Capital Gains Tax raked in by HM Revenue & Customs has skyrocketed. 

The Revenue received £14.3 billion in CGT for the 2020-21 financial year, representing a 42 per cent increase from the previous period.

The £14.3 billion was paid for by around 323,000 taxpayers, a six-fold increase from the 53,000 in 2019-20.

The period showing the increase coincided with many landlords being hit with additional costs and regulation, persuading an increasing number to sell their properties; the period was also one of substantial house price rises, also adding to CGT bills for landlords.

There’s been a huge rise in CGT paid by buy to let landlords quitting the sector or at least reducing their portfolios. Buy to let was cited as one of three reasons why the UK’s CGT bills jumped 20 per cent from £10.8 billion to a record high of £12.9 billion in the 12 months to the end of January this year. 

Other reasons included the cut to Entrepreneurs Relief, costing some business owners millions in extra tax when they sell their stakes, and the stock market rally in 2021, when the FTSE 100 rose 42 per cent from its pandemic trough. 

Shaun Moore, tax and financial planning expert at business consultancy, says three factors are driving this latest huge surge in HMRC’s tax take from capital gains. 

“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 continues: “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.”