The United Kingdom's government has collected a record £24.2 billion in capital gains tax (CGT) revenue for the 2024-2025 tax year, an 89 percent increase from the previous year. This surge is largely attributed to mid-year hikes in CGT rates implemented by the previous Chancellor, Rachel Reeves, in the October 2024 Budget.
Under the new rates, basic-rate taxpayers saw their CGT liability increase from 10 percent to 18 percent, while higher-rate taxpayers now face a 24 percent levy on disposals, up from 20 percent. HM Revenue and Customs (HMRC) also noted that speculation in the lead-up to the budget contributed to the significant increase in receipts.
Despite the record revenue, financial experts caution that this high take may not be sustainable. Elizabeth Bradley, a partner at law firm BCLP, described the increase as a potential "sugar hit caused by forestalling," suggesting that many investors and property owners may have accelerated asset disposals to mitigate anticipated tax increases. If this is the case, future tax receipts could decline as individuals alter their investment strategies.
"If today’s exceptional spike reflects forestalling before the 2024 Autumn Budget, the behavioural response to potential CGT rate changes may now shift," Bradley stated. She added that taxpayers might accelerate disposals ahead of future fiscal announcements or defer gains, a pattern observed after previous CGT reforms.
This potential drop in CGT revenue could present a challenge for the new Chancellor, John Healey, who would need to find alternative ways to bolster public finances. Capital gains tax is levied on profits from assets such as shares, second homes, buy-to-let properties, and personal possessions. Traditionally, CGT rates have been lower than income tax to account for the inherent risks associated with investments.
The number of CGT taxpayers also rose by 45 percent in the 2024-2025 tax year, reaching an all-time high of 584,000. This increase follows consecutive reductions to the tax-free allowance. Furthermore, the number of taxpayers with gains exceeding the previous year's thresholds of £6,000 for individuals and £3,000 for trusts increased by 105,000.
A significant portion of the tax revenue came from a small group of high-value transactions, with 45 percent of receipts originating from those making gains of £5 million or more. These individuals represent less than one percent of the total CGT taxpayer base. Geographically, individuals in London and the South East accounted for approximately half of the total capital gains and liabilities reported.
Pete Fairchild, National Head of Private Clients at tax firm Crowe, echoed concerns about the long-term impact of these tax changes. "The concerns over rising Capital Gains Tax rates have no doubt led many people to bring forward a transaction and sell an asset earlier than expected," Fairchild said. He also noted that the trend of wealthy individuals leaving the UK could be exacerbated by these measures, particularly with potential concerns about an exit tax.
"While cabinet ministers will possibly pat themselves on the back for achieving this outcome, some words of caution – 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," Fairchild added.