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Average CGT bill a staggering £44,272 as the tax take soars – Quilter

Following the latest Capital Gains Tax statistics released this morning,  Shaun Moore, tax and financial planning expert at Quilter has commented.

He said: “The latest statistics show that the government once again took in a record haul for Capital Gains Tax (CGT) in the 2020/21 tax year. A total of £14.3bn was raised on just 323,000 taxpayers, making the average bill a staggering £44,272 at a rate of tax of just under 18%. 

“Three things are driving this. Firstly, as the government has pointed out, there were murmurings of CGT rates being brought in line with income tax rates, making it much more appealing to dispose of assets ahead of any change. Clearly this recommendation from the Office of Tax Simplification did not get enacted, but it did enough to spook people to bring forward their disposals ahead of any potential tax grabs. This recommendation is also likely to be entirely shelved until the next government decides what it is going to do with income tax rates as these seem firmly on the chopping block in order to help consumers.

“The more prominent issue is perhaps the fiscal freeze introduced by Rishi Sunak in the middle of the pandemic. Last year the CGT Annual Exempt Amount was frozen at £12,300 until 2026 at the earliest, and with inflation spiking and allowances following drastically behind, more people will be dragged into the scope of CGT.

“Finally, the reduction in lifetime limit for Business Asset Disposal Relief from £10m to £1m continues to do its job too, with just under 10% of the overall take coming from disposals that qualified for this relief. The amount of gains and the tax charged at the 10% BADR rate has decreased by 60% in just one year, highlighting the number of people getting stung by the lifetime limit reduction.

“Despite the challenging macroeconomic backdrop, asset prices have still risen since this data was collected and as such this tax take is unlikely to stay a record for long. Inheritance tax has been getting more attention than CGT in the recent Conservative leadership contest, but the tax raised from CGT dwarfs it in comparison. While tax rises do seem off the cards for now, it would not be a surprise to see CGT targeted if the next Prime Minister and Chancellor believe they need to raise tax revenues without impacting the majority of the population.”

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