HMRC recently published a commentary on the Capital Gains Tax statistics for the 2019/20 tax year.
- In the 2019 to 2020 tax year, the total Capital Gains Tax liability was £9.9 billion for 265,000 CGT taxpayers. This liability was realised on £65.8 billion of gains. As last year, 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 to 2020 tax year, 41% of CGT came from those who made gains of £5 million or more. This group represents less than 1% of CGT taxpayers each year.
- In the 2019 to 2020 tax year, broadly speaking, as income and size of gain increased, the number of individual taxpayers decreased. In that 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). ER was claimed by 46,000 taxpayers on £28.9 billion of gains in the 2019 to 2020 tax year, resulting in a total tax charge of £2.8 billion. This is the highest amount of gains and tax since the introduction of the relief.
- More detailed information is now available for the 2018 to 2019 tax year. In that year CGT taxpayers disposed of 1.1 million assets worth £135.5 billion and realised gains of £64.1 billion. Financial assets accounted for 85% of the number of disposals, 72% of total disposal proceeds, and 79% of total gains.
- The new Capital Gains Tax on UK property service was used by 75,000 taxpayers who filed 80,000 returns to report just over £1 billion tax liability accrued on residential property disposals in the 2020 to 2021 tax year.
It is interesting to note how the total amount of annual realised gains has accelerated over the years, from £5bn - £10bn through the nineties to £15bn - £25bn per annum ten years ago, to £66bn last year. No doubt this is a reflection of the inflation in asset values generally post the 2008 Global Financial Crisis, fuelled by quantitive easing.
A significant proportion of the annual CGT tax take comes from business disposals, which highlights the important role that Business Asset Disposal Relief (or Entrepreneur's Relief as it was known until 6 April 2020) plays in mitigating entrepreneurs' tax liabilities on exit. Ever keen to raise more cash, the government reduced the lifetime limit from £10m to only £1m in March 2020. Gains that do not qualify for BADR (including gains in excess of the lifetime limit) are taxed at rates of up to 20% (28% in the case of residential property). It is not hard to see how the Treasury might be tempted to erode the value of BADR even further, perhaps as early as this autumn.
The CGT on UK property service was newly introduced for residential property disposals from 6 April 2020 onwards and the volume of returns was of course impacted by Covid 19 and subsequent policy responses (e.g. the LBTT and Stamp Duty holidays). All else being equal, we might expect the number of returns to be higher in the current, 2021/22 tax year.
The full publication can be accessed here.
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Scholes CA also helps individuals who are required to file a return under the CGT UK property service because they have realised a taxable gain on the disposal of residential property; again just call us or e:mail, or fill in our consultation form and someone will get back to you right away.