CGT liabilities fell overall in 22/23 but liabilities on residential property increased by 7 per cent

New figures published by HMRC show an overall 15% decline in Capital Gains Tax (CGT) liabilities in the 2022 to 2023 tax year, although tax liabilities on the sale of residential property increased 7% versus the prior year.

In the 2022 to 2023 tax year, the total Capital Gains Tax (CGT) liability was £14.4 billion for 369,000 taxpayers, realised on £80.6 billion of gains.

In total, the disposal of residential property led to a CGT liability of more than £1.9bn for 149,000 taxpayers in 22/23, up from 141,000 in the prior year when liabilities reached £1.8bn.

In 22/23, the number of taxpayers liable to pay CGT declined by 8% to 369,000 people.

In the 2022 to 2023 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.

London and the South East of England accounted for 48% of total gains and 50% of liabilities.

Capital Gains Tax is a tax paid on the gain you make when you sell an asset that’s increased in value. This needs to be calculated in GBP and so where you have acquired an asset in a foreign currency the movement in exchange rates also needs to be taken into account.

You pay it on gains you make on personal possessions sold for £6,000 or more (but not including your car), property that’s not your main home, any shares not in an Individual Savings Account (ISA) or Personal Equity Plan (PEP) and business assets. It may also apply to gains from cryptocurrency investments, which will need to be reported separately for the first time this year.

You only have to pay CGT on your total gains above an annual tax-free allowance. This annual allowance has dropped significantly in recent years – from £12,300 in 22/23 to £6000 in 23/24 and falling again to £3,000 in the current year.

Dawn Register, Head of Tax Dispute Resolution at BDO said, “While today’s figures show a decline in CGT in the 22/23 tax year, CGT liabilities rose for those selling second properties.  This could be a sign that landlords and holiday home owners are selling up off the back of earlier tax changes and the impact of fiscal drag.

“They also show that CGT tends to come from a small number of taxpayers, with less than one percent of those liable to CGT contributing over two fifths of CGT tax revenues.

“The chancellor set out earlier this week the challenges facing the public finances and acknowledged for the first time that taxes will rise at the next Budget.

“The Labour party manifesto committed to not raising rates of VAT, income tax or National Insurance. It also pledged to cap corporation tax at the current level of 25 per cent for the entire Parliament. This has inevitably shifted the focus onto other taxes which could be in the chancellor’s sights to increase or cut reliefs – and key among these is CGT and inheritance tax.

“Whether or not a rise in CGT is on the cards for this October’s Budget, this increased speculation may well convince some to bring forward their plans to dispose of property or other assets. And in fact, this could be very useful for a Government keen to maximise tax revenues in the current year, with CGT on the sale of a second property due within 60 days of completion.

“Of course, it’s also possible to reduce your tax bill by deducting losses, so this could encourage people to hold on to loss-making assets pending any eventual rise in CGT rates.”