The total capital gains tax (CGT) liability was £9.9bn for 265,000 CGT taxpayers in the 2019/20 tax year, new government figures have revealed.

Data from HMRC data confirmed that this liability was realised on £65.8bn of gains. The total CGT liability and gains increased (3%), but the number of taxpayers decreased (6%).

Most CGT comes from the small number of taxpayers who make the largest gains. In the 2019/20 tax year, 41% of CGT came from those who made gains of £5m or more, although this group represents less than 1% of CGT taxpayers each year.

In the 2019/20 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.

Over a quarter of CGT (28%) came from CGT disposals that qualified for Entrepreneurs’ Relief (ER), claimed by 46,000 taxpayers on £28.9bn of gains, resulting in a total tax charge of £2.8bn in 2019/20. This is the highest amount of gains and tax since the introduction of the relief.

Commenting on the figures, Quilter tax and financial planning expert, Shaun Moore, said: “With asset prices rising and frozen or decreasing allowances, more people will ultimately be brought into scope to pay CGT, and as such it is a good idea to plan your disposals thoroughly and ensure they are done in the most tax-effective way.

“The amount paid in CGT dwarfs what is brought in by inheritance tax and as such will be considered a more attractive tax to raise for the Treasury. The fact that 41% of CGT came from those who made gains of £5m or more suggests an increase in rates is far more likely than any other policy tweak, particularly given the government’s triple tax promise not to raise VAT, income tax and national insurance puts the Treasury in somewhat of a bind.

“Aligning to income tax rates is likely to bring in 40% or 45% tax on these large gains, but the ramifications will hit everyone. Aligning to income tax rates will mean everyone is likely to face at least a 100% increase in the rate payable, but this is higher for the wealthiest with a 125% increase in rates paid for 45% taxpayers.

“Planning now to beat any kind of reform that is mooted for the forthcoming budget in the Autumn will be the most effective strategy for people given the relatively generous rates applicable to gains in 21/22.”

Share Story: