Will the Chancellor target CGT at the Autumn Budget?

Tax increases are expected to be on the agenda when Chancellor Rachel Reeves delivers her first full Budget statement on 30 October. Ms Reeves has claimed that the Conservatives left a £22 billion blackhole in the UK’s finances. So tax rates will more than likely need to rise to help fill this hole. We now wait to see where the Chancellor will look to raise money and Capital Gains Tax (CGT) looks to be one of her options. 

CGT take falls 

CGT revenue fell to £14.4 billion for the 2023/24 tax year, down from £16.9 billion the previous year. 

This decrease in CGT revenue, despite an increase in payments related to residential property sales, reflects broader economic challenges, including a slowdown in the property market and changes in tax rates. 

• Only 369,000 taxpayers paid CGT during 23/24, a drop of 40,000 from the previous year. This reduction is likely linked to fewer property sales and overall lower capital gains. 

• Those earning over £5 million accounted for 41% of the total CGT payments, indicating that wealthier individuals still contribute significantly despite the overall decrease. 

• The majority of CGT payers are aged 45-64, with those aged 55-64 making the largest gains. 

Not good reading  

A 15% drop in revenue does not make good reading for many who fear increases to CGT are around the corner. In addition, the current government should expect lower tax income on residential property in future years due to the Conservative government reducing the tax rate from 28% to 24% last March. 

According to the Office for Budget Responsibility, the government's economic forecaster, the UK is estimated to raise £15.2 billion from CGT in 2024/25. However, the final take can be difficult to forecast. 

Current rates draw criticism 

Ms Reeves has ruled out raising VAT, income tax or National Insurance at the Autumn Budget, so other targets will have to be found. 

CGT is payable by individuals, but also self-employed sole traders, partners in business partnerships and company owners, among others, but the rate paid depends on the income of an individual and the type of asset being sold. 

Critics point out that the current rates are substantially lower than income tax rates and tend to benefit wealthier people. 

For higher earners, CGT is currently 24% on gains from residential property or 20% on gains from other assets. Meanwhile, income between £50,271 and £125,140 is taxed at 40%, while the top rate of tax for the highest earners is 45%. 

Vital revenue 

The Chancellor has previously warned the government ‘will have to increase taxes’ to bolster the public finances but has not specified which ones. 

Ms Reeves said: ‘We've got a Budget on 30 October and we will set out our policy then, but it's always important when you're deciding tax policy to strike the right balance. 

‘Of course you need to bring in the revenue to fund vital public services, but we've also got to grow the economy. I won't do anything that makes it harder to achieve that economic growth and prosperity.’ 

The Autumn Budget 

The Chancellor will deliver the Autumn Budget to Parliament on 30 October.  

Mercia’s tax experts will be watching and will provide detailed analysis of the day’s announcements. Keep your clients up to date with our range of digital and printed products.