Economy
Capital Gains Tax: Soaring Revenue and What You Need to Know
AI Summary
The UK's capital gains tax revenue has soared by almost 80% to £24bn in the last tax year. Changes to the tax rules have pulled more people into the net, making it essential to understand how to reduce CGT bills.
The Surge in Capital Gains Tax Revenue
The UK government has seen a significant increase in capital gains tax (CGT) revenue, with a nearly 80% rise to £24bn in the last tax year. This surge is equivalent to over £800 per household. The increase is attributed to changes in the way CGT works, pulling more people into the tax net, not just the wealthy.Understanding Capital Gains Tax
CGT is a tax on the profit made when selling or 'disposing of' an asset that has increased in value. This includes investments, properties not used as main homes, and personal possessions worth £6,000 or more, excluding cars. The tax-free allowance, known as the annual exempt amount, has been reduced over the years: it was £12,300 until 2022-23, then cut to £6,000, and now stands at £3,000.The Financial Impact
The Office for Budget Responsibility predicts that CGT revenue will continue to rise, reaching £35bn by 2030-31. The current rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Experts stress the importance of utilizing tax-free allowances and exploring legitimate ways to reduce CGT bills.Legitimate Ways to Reduce CGT Bills
- Transfer investments between spouses or civil partners to use both CGT allowances.
- Make full use of Isa allowances, which allow UK residents aged 18+ to invest up to £20,000 per tax year.
- Offset losses against gains to cut the overall tax bill.
- Reduce taxable income by paying into a pension or making charitable donations.