The number of taxpayers paying Capital Gains Tax (CGT) fell last year sparking fears CGT may be targeted in the next Budget, despite total liability and gains increasing.
The latest figures from HM Revenue & Customs show the number of CGT taxpayers decreased 4% year-on-year to 276,000, while total CGT liability was £9.5 billion in 2018-19, up 6% on the previous year, across £62.8 billion of chargeable gains.
HM Revenue & Customs said most CGT comes from the small number of taxpayers who make the largest gains. New statistics show that in 2018-19, 40% of CGT came from those who made gains of £5 million or more. This group represents less than 1% of CGT taxpayers each year.
Meanwhile, just over a quarter of CGT came from disposals that qualified for Entrepreneurs’ Relief. ER was claimed by 46,000 taxpayers on £27.7 billion of gains in 2018-19, resulting in a total £2.7 billion tax charge.
Laura Suter, personal finance analyst, AJ Bell, says the Chancellor may crackdown on CGT reliefs and allowances or raise rates as the Government seeks to plug the hole left by the Covid-19 crisis.
According to Suter, the drop in the number of taxpayers, which represented fewer than 1% of the total people paying income tax may mean the Government could “decide to bring more people into the CGT net, meaning more individuals pay the tax, or align the CGT rates with income tax.”
Suter said: “Another area that may pique the Government’s interest is the level of gains versus the actual tax take after all allowances and reliefs are taken into account. There were £62.8bn of total gains made by individuals in 2018/19 but only £9.5bn of tax taken, representing an average tax rate of 15%.
“It was suggested that Entrepreneurs Relief might be slashed in previous Budgets. The latest figures show that the total gains eligible for the relief has more than doubled over the past eight years, meaning it could come under more scrutiny. The Government has already restricted the lifetime limit from £10m to £1m but more cuts could be on the cards.”
