- Chancellor left Capital Gains Tax relatively untouched in Autumn Budget
- But CGT receipts forecast to rise from £9.2bn in 2021/22 to £19.7bn in 2026/27
- Equity price increases and changes to entrepreneurs' relief behind forecast
Capital Gains Tax receipts are forecast to more than double over the next five years – despite the Chancellor leaving CGT relatively untouched in the Autumn Budget.
The Government expect to collect £9.2bn in CGT this tax year before a sharp increase to £13bn next tax year. By 2026/27, the Government expect to collect nearly £20bn a year in CGT.
|
2021/22 |
2022/23 |
2023/24 |
2024/25 |
2025/26 |
2026/27 |
CGT estimate |
£9.2bn |
£13bn |
£15.2bn |
£16.7bn |
£18.1bn |
£19.7bn |
*Source: Office for Budget Responsibility
Sean McCann, chartered financial planner at NFU Mutual, said: “Despite concerns that capital gains tax would be radically overhauled with higher rates to help repair the public finances, Rishi Sunak left it relatively untouched in his Budget.
“These forecasts – which suggest CGT receipts will more than double in five years – may have prompted the Chancellor to leave the tax alone.
“The projected increase is based on anticipated rises in equity prices in the coming years as the world bounces back from the CV19 pandemic.
“This, combined with the impact of changes to Entrepreneurs’ relief in March 2020, which slashed the lifetime limit from £10m to £1m for those disposing of qualifying businesses, may have influenced the Chancellor’s decision.”
Welcome change to paying tax on residential property
The Chancellor did make one small change to CGT in the Budget, doubling the time to report and pay tax due on gains from residential property from 30 days to 60 days.
The extension comes just over a year after the deadline was slashed to 30 days after previously being owed by January 31 following the end of the tax year.
Sean McCann added: "This is a welcome change which gives people more time to pay the tax after selling or gifting residential property such as holiday homes or rental property."
Ways to reduce your CGT bill
- Gifts between spouses or civil partners can be made free of CGT. By transferring ownership of part of the asset you’re disposing of - whether that’s shares or property - to your spouse or civil partner, you can use two tax free annual exemptions of £12.3k, which means the first £24.6k of any gain will be tax free.
- Similarly, if your spouse or civil partner will pay a lower rate of CGT because they are not higher rate income tax payers it can be beneficial to give them a larger share of the asset before the sale so that as a family you pay a lower amount of tax.
- As we each have a £12.3k annual tax-free CGT exemption, it can make sense to stagger disposals across more than one tax year. If selling shares or investment funds, it may be possible for spouses or civil partners to realise £24.6k of tax-free gains before April 5 and a further £24.6k from the 6th April, giving a total tax-free gain of £49.2k.