Craig Simpson, tax partner at Bates Weston has been looking at the recent Capital Gains Tax (CGT) Statistics released by HMRC, which show CGT collected reached a record high at £14.3 bn in the 2020/21 tax year.
According to HMRC:
“This liability was realised on £80 billion of gains. The total CGT liability has increased by 42% from the previous year, while the amount of gains and number of taxpayers have increased by 19% and 20% respectively.”
Some believe that taxpayers brought forward disposals in response to anticipated changes to the CGT regime. Commentators widely expected the Chancellor to have brought CGT in line with Income tax. In the event these changes did not happen. Changes were made to Business Asset Disposal Relief in March 2020 reducing the lifetime limit for the relief from £10 million to £1 Million. As a result both the amount of gains on which the relief was claimed and the amount of tax charged at 10% BADR rate decreased by 60% between 2019/20 and 2020/21 tax years.
“There will clearly have been some activity to advance disposals because of the threat of a rate change and accelerated plans to retire post Covid. That said it does also show how much capital has moved in the economy at a time when many would predict a more negative outlook.”