Capital Gains Tax revenue up as buy to let investors quit

New figures published by HMRC show a 7% rise in Capital Gains Tax liabilities on the sale of residential property in the 2022 to 2023 tax year.

In total, the disposal of residential property led to a CGT liability of more than £1.9 billion for 149,000 taxpayers in 22/23, up from 141,000 in the prior year when liabilities reached £1.8 billion.

Dawn Register, head of tax dispute resolution at accountancy firm BDO: “CGT liabilities rose for those selling second properties.  This could be a sign that landlords and holiday home owners are selling up off the back of earlier tax changes and the impact of fiscal drag.

“They also show that CGT tends to come from a small number of taxpayers, with less than one percent of those liable to CGT contributing over two fifths of CGT tax revenues.

INHERITANCE TAX

“The Chancellor set out the challenges facing the public finances and acknowledged for the first time that taxes will rise at the next Budget. The Labour party manifesto committed to not raising rates of VAT, income tax or National Insurance. It also pledged to cap corporation tax at the current level of 25 per cent for the entire Parliament.

“This has inevitably shifted the focus onto other taxes which could be in the chancellor’s sights to increase or cut reliefs – and key among these is CGT and inheritance tax.

“Whether or not a rise in CGT is on the cards for this October’s Budget, this increased speculation may well convince some to bring forward their plans to dispose of property or other assets. And in fact, this could be very useful for a Government keen to maximise tax revenues in the current year, with CGT due on the sale of a second property due within 60 days of completion.

“Of course, it’s also possible to reduce your tax bill by deducting losses, so this could encourage people to hold on to loss-making assets pending any eventual rise in CGT rates.”

Contrasting with the rise in property CGT paid, there was an overall 15% decline in non-property CGT liabilities in 2022-23.