Capital gains tax take hits record level

interactive investor comments on the latest statistics.

HMRC has today revealed that record amounts of capital gains tax (CGT) were recorded in the 2019 to 2020 tax year.

The total amount of gains was £65.8 billion: an increase of 3% from the previous year.

Key points:

• In the 2019 to 2020 tax year, the total Capital Gains Tax liability was £9.9 billion for 265,000 CGT taxpayers. This liability was realised on £65.8 billion of gains. Year-on-year, the total CGT liability and gains increased (3%), but the number of taxpayers impacted decreased (6%).
• Most CGT comes from the small number of taxpayers who make the largest gains. In the 2019 to 2020 tax year, 41% of CGT came from those who made gains of £5 million or more. This group represents less than 1% of CGT taxpayers each year.
• In the 2019 to 2020 tax year, 43% of CGT gains for individuals came from the 13% of CGT liable individuals with taxable incomes above £150,000, the additional rate threshold for Income Tax.

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “CGT is an important source of income for the Exchequer, rising to record highs year after year.

“This latest record CGT receipts haul has been influenced by the government’s tax squeeze on buy-to-let landlords. Changes to the tax treatment of mortgage interest on buy-to-let properties has encouraged many small landlords to decide a rental property portfolio is no longer worth the hassle and sell – triggering a CGT charge.

“When it comes to investments, many investors had made large returns in recent years in what was the longest bull market in history and took profits before the coronavirus pandemic caused global stock markets to crash.

“The only way is up for the CGT haul in future it seems, powered by changes to Entrepreneurs Relief, which was scaled back from a lifetime allowance of £10 million to £1 million. CGT remains firmly in the government's sights following a review by the Office of Tax Simplification last year, recommending changes to help cover the enormous costs to support the economy throughout the coronavirus pandemic.

“However, there are a number of ways to minimise your CGT liability, from deducting any investment losses you have made, and, if you are married or in a civil partnership, transferring assets to each other without charge, enabling the use of both CGT allowances.”