CGT Receipts: why it’s premature to say the chancellor’s tax hike has backfired – analysis by Charles Stanley

Written by Rob Morgan, Chief Investment Analyst at Charles Stanley

Recent data shows CGT receipts on a declining trend – from nearly £17 billion in 2022-23 to £14.5 billion in 2023-24, and to £13.1 billion in 2024-25.

It is important to note that CGT receipts mostly correspond to the year after an asset is sold. For most assets, people report through a Self Assessment tax return and pay by 31 January following the end of the tax year in which the disposal took place.

Therefore, a behavioural response to the higher CGT rates imposed on the day of the Budget last October will generally show in the 2025-26 figures. At this point a rise in receipts is expected owing to people bringing forward disposals in advance of the Budget when rates were widely anticipated to go up.

An exception is second properties, where people must report and pay any CGT within 60 days of completion. But here there is no behavioural impact either because rates of CGT on second homes didn’t rise in the October Budget – they only did for other assets, which effectively came into line with property.

It is therefore premature to say that the Chancellor’s decision to hike rates of CGT has ‘backfired’, as in reality the jury is still out. Previous decisions by government to reduce the allowance may have influenced behaviour, but there are various other factors at play too, notably the lean market returns in 2022 where people will have reported and paid tax on by January 2024.