Rumours are already gathering pace ahead of the Autumn Budget, which is set to take place on 28th October. Could Capital Gains Tax (CGT) be the next tax under attack?
At this stage, nobody outside the Treasury knows exactly what will happen. However, history tells us that when governments need to raise money, Capital Gains Tax often comes under the spotlight.
For that reason, we’re having more conversations with clients who are asking:
- Should I sell now rather than later?
- Should I exercise and sell my share options before October?
- Is it time to dispose of an investment property?
- Should I crystallise gains while I know the current tax rates?
If these questions sound familiar, you’re certainly not alone.
Why CGT Is Back in the News
The new Government faces many of the same challenges as its predecessor:
- Economic growth remains subdued.
- Government borrowing is high.
- National debt remains significant.
- Public spending pressures continue to increase.
The Chancellor has only a limited number of levers available to raise revenue.
While there has been plenty of discussion about income tax, inheritance tax, and pensions, CGT remains an attractive target because many people view it as a tax on investment gains rather than earnings.
That doesn’t mean changes are definitely coming. But it does mean people are paying attention.
Selling purely to avoid a potential future tax rise isn’t always the best decision if it doesn’t align with your wider financial goals. We would therefore always recommend that you speak to your accountant before you take any such steps. We are here to help you, so call or email your normal manager if you would like to discuss this.
Landlords Are Also Reviewing Their Position
Many landlords are reaching a similar crossroads.
For years, the buy-to-let market has faced increasing challenges, including:
- higher mortgage costs,
- increased compliance requirements,
- the incoming Renters’ Rights Act,
- Making Tax Digital requirements,
- and increasing administrative burdens.
For some landlords, particularly those approaching retirement, the question is becoming:
“Is owning property still worth it?” As a result, we’re seeing landlords evaluate whether now is the right time to exit. The difficulty is that many property markets remain subdued.
In many parts of the UK, it is still very much a buyer’s market. That creates a balancing act between:
- securing a known CGT position; and
- achieving the best commercial value for the asset.
Tax should always be considered in decision-making, but not on its own. You’ve got to revisit your goals.
If you do indeed decide to sell your investments, then you need to be clear on what you need to report to HM Revenue and Customs (HMRC).
When Do You Need to Report a Capital Gain?
One of the most frequent questions we receive is: “If I don’t owe any tax, do I still need to report the disposal?” The answer often surprises many people. The truth is that you must report your capital gains if your proceeds exceed £50,000.
Even if you make little or no profit, you generally need to report the disposal if your total proceeds exceed £50,000 in any tax year. This catches many people off-guard because they assume that if there is no profit, there is nothing to report. However, the reporting requirement is based on proceeds, not simply on taxable gains.
So, when don’t you have to report the gains to HMRC?
- If your total proceeds in any tax year are less than £50,000,
- And if your total gains are less than the annual Capital Gains Tax (CGT) exemption of £3,000 in a tax year.
In these cases, you generally have no reporting requirement and no tax to pay. For many smaller disposals, the situation remains relatively straightforward. However, remember it is always good practice and to your benefit to report to HMRC if you have made a capital loss. This is because losses can be carried forward to reduce any future gains and therefore reduce tax.
We often see taxpayers overlook allowable costs, acquisition expenses, enhancement expenditures, or other reliefs that could help reduce their tax liability.
If your total gains in any tax year exceed £3,000, which is your personal annual exemption, you must report the capital gains to HMRC. This is done either through self-assessment or other reporting methods.
What Are the Current Capital Gains Tax Rates?
At the time of writing, the main rates of Capital Gains Tax are:
- 18% for basic rate taxpayers
- 24% for higher and additional rate taxpayers
The actual rate depends on:
- the type of asset disposed of,
- your taxable income,
- and your overall tax position during the year.
This is another reason why obtaining advice before a disposal can be valuable.
How Do You Report a Capital Gain?
There are two main routes.
- Through Self-Assessment
If you are already within Self-Assessment, you will simply disclose the disposal on your tax return.
HMRC will calculate any tax due as part of the annual filing process.
- Directly to HMRC
If you’re not normally within Self-Assessment, you can report gains directly to HMRC and settle any tax due. Many people are unaware this option exists.
You can use the real-time service and sign in with your Government Gateway account on the Gov.UK report and pay your CGT
If you plan to handle this yourself, make sure you fully understand the rules and know which expenses you can claim back. The HMRC service is not intended to provide advice; it is designed to assist with the reporting and payment of taxes.
And remember if you sell a residential property that creates a taxable gain, you generally have 60 days from completion to:
- report the gain online, and
- pay the Capital Gains Tax.
Miss the deadline and penalties and interest will apply. Given how quickly 60 days can disappear during a property transaction, it is sensible to calculate the position as early as possible. If need be consult accountant like us in advance to help you feel calm and confident about your taxes.
So, Should You Sell Before October?
The honest answer is:
Maybe. Maybe not. Nobody currently knows whether CGT rates will increase, remain unchanged, or be restructured entirely. Tax should certainly form part of the conversation. There were similar conversations before Labour’s first Budget, but nothing came to fruition.
But investment objectives, future income needs, market conditions, and personal circumstances matter just as much. A rushed sale simply to avoid a possible tax increase can sometimes destroy more value than it creates. So, we don’t recommend you do that.
Final Thoughts
The rumours surrounding Capital Gains Tax are unlikely to disappear anytime soon.
Whether you’re a shareholder sitting on significant gains, an employee with share options, or a landlord wondering whether it’s time to exit the market, now is a sensible time to review your position.
Not panic. Not rush. Just review.
At Myers Clark, we help clients navigate CGT issues every day. Some are long-standing clients; others come to us specifically for help with a disposal or tax calculation.
If you’re considering selling an asset, exercising share options, disposing of a property, or simply want to understand your potential exposure, speak to your usual manager.
If you are not yet working with us, here’s who we help