Capital Gains Tax (CGT) receipts reached a record high in the 2024-25 tax year, as both the amount of taxable gains and the number of people paying the tax increased significantly.
New figures from HM Revenue & Customs (HMRC) show that taxpayers reported £127.3 billion in capital gains during the year. This was an 82% increase from the previous tax year and the highest level recorded.
The amount of CGT liability also climbed sharply, reaching £24.2 billion. This was 89% higher than the £12.8 billion recorded in 2023-24.
The number of taxpayers affected by CGT also reached a new high. HMRC recorded 584,000 people with a CGT liability during 2024-25, representing a 45% increase on the previous year.
What Does This Mean for Property Investors?
The figures will be of particular interest to landlords and property investors, as CGT can apply when investment properties and other residential assets are sold for a gain.
However, the HMRC figures cover capital gains across a range of assets and are not limited to property sales.
One factor behind the rise is the significant reduction in the CGT Annual Exempt Amount in recent years.
The tax-free allowance was reduced from £12,300 in 2022-23 to £6,000 in 2023-24, before falling again to just £3,000 from April 2024.
As a result, investors have less scope to make gains without becoming liable for CGT. This can include landlords selling buy-to-let properties or other investment assets.
HMRC estimates that the successive reductions in the allowance brought around 163,000 additional taxpayers into the CGT system. The cuts also resulted in an estimated £4.8 billion of additional gains being subject to CGT in 2024-25.
Investors Brought Forward Asset Sales
The sharp increase in gains may also reflect investors selling assets ahead of expected tax changes.
David Little, partner in financial planning at wealth management firm Evelyn Partners, said the figures showed that UK investors had realised more gains and paid more CGT than ever before.
He suggested that some investors may have brought forward disposals because they expected CGT rates to increase at the 2024 Autumn Budget.
Those expectations became reality when CGT rates increased on 30 October 2024. The main rates rose from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers.
There was also a planned increase in the rate applied to Business Asset Disposal Relief from April 2025.
Little said some investors had already taken action before the Budget, particularly against the backdrop of the previous reductions to the Annual Exempt Amount.
What Could Happen Next?
It remains unclear how much of the latest increase in CGT liabilities was driven by investors bringing forward sales before the October 2024 rate changes.
If many investors had already realised their gains ahead of the Budget, the higher CGT rates could have a different impact on future receipts. Some investors may also choose to hold onto assets for longer rather than sell and trigger a larger tax bill.
For investors, the figures highlight the importance of considering the tax implications before selling an asset.
Using available tax allowances and tax-efficient investment options, such as ISAs and pensions, can help investors manage their exposure where appropriate. Married couples may also have additional planning options because they can make use of their individual allowances and certain transfers between spouses.
With CGT rates and allowances having changed significantly in recent years, landlords and property investors will need to keep a close eye on future tax policy when making decisions about their portfolios.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property