HMRC has released the latest statistics about Capital Gains Tax (CGT) for the 2021-22 tax year which show record levels of gains and a significant increase in CGT being paid on the sale of residential property.
There has been a 15% increase in both capital gains and Capital Gains Tax (CGT) being paid compared to 2020-21, with the total CGT bill for the period nearing £17 billion from an all-time high of 394,000 taxpayers.
- 45% of this CGT came from taxpayers realising gains of £5m and over. These individuals represent just under 1% of CGT taxpayers, whereas in contrast, the top ‘1%’ of Income Tax taxpayers contributed 30% of all Income Tax paid during the same period.
- With gains sitting at £93 billion for the period, this gives an average CGT rate of 18.3%.
- Since CGT rates currently range between 10% and 28%, depending on the type of asset being sold (residential property is charged at 18% or 28%) and the level of the taxpayer’s income, this is perhaps no surprise.
- What is more surprising is that claims to Business Asset Disposal Relief (BADR) and the accompanying 10% tax rate accounted for just 7% of CGT in the period, compared to 8% in 2020-21.
- There was a 60% increase in CGT on residential property in the year. Data from the CGT on UK property service indicates similar levels of CGT are due for the 2022-23 tax year though this is expected to increase once late filings are added to the total.
- This is presumably a continuance of the growing trend of private landlords disposing of rental property in order to cash whilst prices were high as well as avoiding the increasing levels of regulation and taxation in the buy-to-let market.
- There has been no real change in where CGT-paying taxpayers live with just over half residing in London and the South East whilst 60% of all gains and tax came from those aged 45-64.
The report suggests that rumours of future increases in CGT rates, including observations in a report by the recently abolished Office of Tax Simplification (OTS) about bringing CGT rates into line with Income Tax rates may have caused taxpayers to bring forward disposals; if this is true we should expect to see a drop in CGT in the current and next few years. This is also likely given the recent drops in house prices across the country. However, we have yet to see the impact of the reduction in the CGT annual exempt amount which was only announced in November 2022.
Useful guides on this topic
Business Asset Disposal Relief (BADR) Disposal of a business
When does BADR apply? What is the rate of BADR? How do you claim BADR? What BADR case law is there?
CGT: Reporting when & how?
How do you report your capital gains? What return do you use? There are different ways for individuals to report capital gains depending on whether you are resident or non-resident, and whether you are in or out of Self Assessment.
How to calculate a capital gain or loss
How do you calculate a capital gain or loss? What costs are deductible? How can losses be utilised against capital gains?
CGT: Payment of tax
When is Capital Gains Tax (CGT) due? Can I pay in instalments? What are the penalties if I pay late?