Slashed capital gains tax (CGT) thresholds have triggered a jump in the number of clients needing support calculating their liabilities, according to new research by Financial Software Ltd.
On average, advisers said 18% of their clients were impacted by capital gains tax in 2022/23, more than doubling to 37% in the 2024/25 tax year. The annual exemption amount for the tax fell from £12,300 in 2022/23 to just £3,000 in 2024/25, dragging an additional 87,000 taxpayers into the scope of capital gains tax.
Over the same period, 10% of advisers said they gained new clients because of changes to the tax and unexpected liabilities due to cuts to the allowance.
According to HM Revenue & Customs, 359,000 individuals were liable for capital gains tax in 2023/24, up marginally from 355,000 the tax year prior. Nearly two thirds (65%) of the individuals who paid the tax in 2023/24 had a taxable income under £49,999, meaning the majority of those subject to capital gains tax were likely to be basic rate taxpayers.
Michael Edwards, managing director of Financial Software Ltd, said: “Given the number of taxpayers that have now been brought into scope for CGT, it’s no surprise that many are turning to advisers for support and expertise.
“With tax reporting becoming an increasing part of advice firms’ day-to-day work, it’s imperative that providers and platforms support their advisers with robust tools and accurate data to make light work of what can be an extremely onerous and complex task. This is also vital to ensure they’re fulfilling their obligations under Consumer Duty and supporting clients with avoiding foreseeable harm such as hefty fines from HMRC.”
Looking ahead, the Office for Budget Responsibility predicts a significant increase in capital gains tax receipts over the next few years, forecasting a jump to £19.7 billion in the 2025/26 tax year, rising to £25.5 billion by 2029/30.
Financial Software Ltd.’s data comes amid mounting speculation around potential changes in the upcoming Budget, including whether the Chancellor will alter capital gains tax rules once again. Separate research by wealth manager Saltus suggests that more than three quarters (78%) of high net worth families expect tax rises in the next year, with nearly half (46%) believing capital gains tax will be hiked again following last year’s increases.
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