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Official data has revealed that HMRC took a record £14 billion in capital gains tax (CGT) in the 2020/21 financial year.
The data showed that the total amount of CGT liability was £14.3 billion for 323,000 taxpayers. HMRC said that the liability has increased by 42% from the previous tax year.
Policy changes affecting the eligibility criteria for Business Asset Disposal Relief (BADR) contributed to the increase in CGT liabilities, HMRC added.
8% of CGT came from CGT disposals that qualified for BADR. HMRC found that BADR was claimed by 47,000 taxpayers on £11.9 billion of gains in the 2020/21 tax year, resulting in a total tax charge of £1.1 billion.
Additionally, in the 2020/21 tax year 129,000 taxpayers used the CGT on property service to file 137,000 returns. These returns revealed a tax liability of £1.7 billion, which was accrued on disposals of residential property.
This latest annual update shows the importance of CGT receipts to the Treasury. A new Prime Minister will take office in early September, and tax reforms could be announced in a new Budget, meaning families may wish to give thought to their tax planning and make the most of their current allowances and the relatively low rates of CGT before any changes are introduced.
Anyone who is considering selling a property or business should remember that disposing of large assets can be a lengthy process. However, the risk of taking action in anticipation of changes does need to be considered.
Even without any changes to CGT, greater numbers of people are likely to be impacted by CGT over the coming years as a result of a decision in the March 2021 Budget by the then Chancellor Rishi Sunak to freeze the annual £12,300 capital gains allowance until 5 April 2026.
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