The amount of capital gains tax paid by people soared by 60% in a year.
Hargreaves Lansdown said £808 million was paid in CGT during the final three months of 2024, up from £505 million during the same quarter of the previous year.
While awareness around the tax is increasing, the investment platform said that it may still slip under the radar for some. Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Capital gains tax is the Luke Hemsworth of tax threats. It’s far less well-known than its tax siblings and yet carries some serious muscle.
“It has been in the spotlight more since the slashing of the tax-free allowance and the upping of the rate on non-property assets but there’s still a chance it has slipped under the radar.”
Hargreaves Lansdown said there are a number of reasons why people may be hit with an unexpected tax bill. The reduction in the tax-free allowance means that in 2022/23, people could realise a gain of £12,300 without incurring a tax bill but in just two years, that figure has fallen to £3,000. It means more people face paying more CGT, while some people are being exposed for the first time.
At the same time, the Government has chosen to hike the rate on stocks and shares and other non-property assets from 20% to 24% for higher rate taxpayers and from 10% to 18% for basic rate taxpayers.
In addition, Hargreaves Lansdown said that while people normally associate capital gains with selling an asset, people may also incur CGT if they give away assets with gains of over £3,000.
“If you give it to a spouse or civil partner, there’s no tax on the transfer but when they come to sell it, their gain will be calculated from the date you acquired it,” Coles said. Equally, if someone sells something for less than it is worth, they may still be liable to pay more than they think.
Hargreaves Lansdown said crypto investors may also potentially face a CGT bill.
“This can easily be overlooked because initially, crypto was conceived as a new way of spending money. However, because speculation has meant the value can change so much, you could be spending assets which have gained significantly in value and because this is counted as disposing of them, it can trigger a tax bill. It means you need to be certain about when you acquired the assets and how much they have gained in value since then,” Coles explained.
The firm also warned that those selling items on sites like eBay may also incur a tax bill, with those who make a gain of more than £3,000 on items such as jewellery, paintings and antiques, could be liable.
Lastly, Hargreaves Lansdown said CGT can be payable on items that have been exchanged for something else. “This includes two people exchanging second properties. It also includes someone swapping one type of crypto for another,” Coles added.
Sheltering as much of your portfolio in ISAs as possible can be one important way of avoiding a tax bill, said Hargreaves Lansdown. The firm also urged people to plan as a couple, transferring investments into the other person’s name without triggering CGT, and consider investing in a Venture Capital Trust to minimise their exposure.
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