Treasury set to rake in record CGT this year - with more to come

A forecast suggests HM Revenue & Customs will rake in no less than £8.8 billion in Capital Gains Tax in 2018 - with plenty more to come as the figure grows in the next five years.

Analysis of HMRC receipts by the NFU Mutual insurance group suggests that the Revenue took £5.5 billion in CGT in January alone - always the largest month for tax take by some considerable margin.

The firm says this makes a total £8.8 billion figure highly likely, which would be around five per cent up on the total for the previous year.

On top of that the Office for Budget Responsibility is forecasting that CGT receipts will mushroom to £13.3 billion by 2022-23.

“A large chunk of these receipts will be from people selling houses and flats they’ve been renting out. In doing so, they are hammered by an extra eight per cent surcharge on standard rates of capital gains tax” explains Sean McCann, chartered financial planner at NFU Mutual.

“The OBR forecasts show receipts increasing sharply to £13.3 billion in five years’ time, which suggests that more and more buy to let investors are expected to unload properties as tax changes bite” he adds.

McCann says CGT can be charged when assets and investments are sold or given away, and that for most assets such as shares, gains are taxed at 10 per cent or 20 per cent.

But anyone selling a property that isn’t their main residence will pay 18 per cent or 28 per cent, depending on the size of the gain and their other income.

‘’The slashing of tax relief on mortgage interest payments means that for a growing number of landlords, the figures no longer add up. Many have enjoyed rising property prices over many years and will seek to cash in, providing a tax bonanza for the government” he adds.

He says some BTL investors work in partnership with their spouse or civil partner to reduce their combined tax bills, taking advantage of each individual’s CGT allowance of £11,300, by transferring shares and property between them. 

“However we’ve been warning our customers to watch out for potential tax traps. In some circumstances, transferring property between spouses could trigger a stamp duty charge’’ he cautions.