Less than one per cent of people paying Capital Gains Tax accounted for 45 per cent of a record £24.2 billion CGT bill in 2024-25, according to official figures.
HMRC data released on Thursday shows that speculation surrounding a CGT hike pushed some taxpayers to bring forward asset sales. Taxpayers declared a record £127 billion of gains – profits made when assets are sold – up 82 per cent on the year before, while CGT liabilities rose 89 per cent.
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The tax authority said one factor behind the jump was pre-Budget speculation over rate rises in 2024, raising questions over how wealthy taxpayers may respond if rates are raised again in October’s Budget.
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One tax specialist suggested the figures showed how a change in taxpayers’ behaviour was driven by a government that had secured ‘money for nothing’.
‘Constant rumours of changes to the Capital Gains Tax legislation have driven transactions over the last year or two,’ said Laurence Field, corporate tax partner at accountancy and advisory firm Crowe. ‘This is probably reflected in the numbers.’
‘In many ways it’s the dream solution for a revenue-hungry government; prompt people to think rates will rise and encourage them to realise assets and pay tax.’
Fewer than one per cent of those paying CGT, with gains of £5 million-plus, accounted for 45 per cent of the total, while around half of taxpayers with gains under £25,000 contributed less than two per cent of the total.
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Changes to Business Asset Disposal Relief (BADR), which gives some entrepreneurs a lower CGT rate when selling a business, also encouraged early sales. HMRC said that Rachel Reeves’ announcement in 2024 that the rate would rise helped push a 45 per cent increase in taxpayers making BADR-eligible disposals, from 42,000 to 61,000.
Exit tax fears grow among wealthy business owners
Pete Fairchild, Crowe’s national head of private clients, said ongoing uncertainty surrounding tax changes could narrow the UK’s appeal to wealthy taxpayers.
‘The trend of wealthy people leaving the UK continues because of these measures, not helped with further concerns about the potential of an exit tax being brought in,’ he said.
Alex Ruffel, a private client tax lawyer and partner at Farrer & Co, which advises wealthy individuals, families and family offices, told Spear’s that while she believes talk of a UK exodus is ‘exaggerated to some degree’, she has increasingly been speaking to long-standing UK business owners who are considering leaving.
‘They’ve never lived elsewhere, they’ve built businesses here and they feel they want to get out of the country and they’re worried about exit tax. That’s the big worry at the moment.’
‘We’re not saying everybody is flooding out of the UK,’ she said. But concern over a possible exit tax could now encourage people to sell UK assets before leaving, boosting CGT in the short term, while potentially reducing how much tax the Treasury can collect from them once they are abroad.
Elsewhere in the HMRC figures were the first separate release of cryptoasset gains, with 17,600 taxpayers reporting £1.38 billion of crypto gains. More than half of those gains were made by fewer than two per cent of relevant taxpayers.
