UK’s CGT Bill Breaks £15bn for the First Time
by Growthdeck Team
13 January 2023News EIS Growthdeck tax
Note: The contents of this article are the author's opinion and have not been approved as a financial promotion.
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Our research, which was revealed in the print edition of The Sunday Times, shows a dramatic increase in the UK’s Capital Gains Tax (CGT) bill. It has now broken the £15bn barrier for the first time, with £15.3bn collected in the year to October 31 2022*, up 27% from £12bn in the previous twelve months.
This research has also been covered by Spear's (Capital Gains Tax Takings Reach Record Level), IFA Magazine (UK’s CGT bill breaks £15bn for the first time — up 27% in just a year) and Wealth Briefing (UK's Capital Gains Tax Revenues Hit Record).
Ian Zant-Boer, our CEO, says that this dramatic increase in CGT bills in the UK has been partly driven by an increase in taxes imposed on the sale of businesses by successful entrepreneurs. In 2020 the Government reduced the lifetime allowance of Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) from £10m to £1m. This means that entrepreneurs selling off business assets have incurred greater tax liabilities as a result of cuts to the relief.
The rise in CGT bills is also due in part to large numbers of buy-to-let investors selling off properties to capitalise on high property valuations, as house prices soared at the end of the COVID pandemic.
Our CEO, Ian Zant-Boer, says:
“The UK is paying more CGT than ever. Unfortunately, entrepreneurs will have accounted for a significant proportion of the increase in those bills.”
“We believe that having low CGT bills on the sale of businesses by entrepreneurs would reward them for having taken a high degree of personal risk to benefit the economy by creating wealth and jobs.”
South-West London Hit With Largest CGT Bill of Any Area in the UK
Our research also reveals that, of 121 areas included in the study, residents in South-West London have incurred the largest CGT bills in the UK — £1.3bn in 2020/21.**
In second place is West London, with taxpayers paying £1bn in CGT bills, and North-West London in third place, with £530m. Inner London accounts for 24% of all CGT paid across the UK over the last year.
Here is a summary of the top 10 UK areas with the highest bills:
Ian Zant-Boer says:
“Individuals in these areas that have paid the highest CGT bills are most likely to need help managing their tax exposure if they have large investment portfolios.”
“One of the best ways to mitigate CGT exposure is to diversify assets into investment schemes like the Enterprise Investment Scheme.”
The Enterprise Investment Scheme (EIS) is a venture capital scheme that offers significant tax breaks to individual investors who invest in EIS-qualifying companies. EIS tax reliefs include up to 30% income tax relief, tax-free growth, and a “carry back” facility, which allows an investor to offset taxable gains from the previous year.
Importantly, EIS allows investors to not pay CGT on any gains realised after three years, and to defer capital gains tax due on the sale of another asset by re-investing the gain in an EIS-qualifying company.
Ian Zant-Boer says:
“Not only does investing in EIS allow individuals to reduce their CGT bill, but it also offers the opportunity to support growing UK businesses. The opportunity to invest in innovative, fast-growing companies means many wealthy individuals see EIS investments as a core part of their investment portfolio.”
* Source: HMRC, Year end 31st October
** Source: HMRC, Year end 5th April
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