The UK’s Capital Gains Tax bills jumped 20 per cent from £10.8bn to a record high of £12.9bn in the past year, according to new research shared with City A.M. this afternoon.
The increase is primarily due to a rise in tax on entrepreneurs selling businesses causing The value of capital gains in the UK has leapt in the last 12 months and, according to accountancy group UHY Hacker Young, the increase was driven by three major factors.
Firstly, the cut to Entrepreneurs Relief, the lifetime limit for Entrepreneurs Relief – now Business Asset Disposal Relief – has been lowered from £10m to £1m, costing some business owners millions in extra tax when they sell their stakes.
Secondly, buy-to-let property investors are taking profits in the hot housing market as the average UK house price rose 16 per cent from January 2020 to December 2021.
Thirdly, the stock market rally, the FTSE 100 rose 42 per cent from its pandemic trough to the end of 2021.
Selling businesses and assets
Discussing the figures with City A.M. this afternoon, Phil Kinzett-Evans, partner at UHY Hacker Young, said: “This is a very sharp increase in CGT largely paid for by an increase in taxes on entrepreneurs selling businesses.”
“The last year has seen some entrepreneurs pay seven-figure sums in extra tax they weren’t expecting. Entrepreneurs’ Relief was a vital incentive for individuals to start and build businesses and the 90 per cent cut the Treasury introduced has hit hard.”
“A lot of entrepreneurs accelerated plans to exit their businesses when rumours of the end of Entrepreneurs’ Relief started swirling in 2019 and 2020,” he added. “Those who did saved themselves millions in tax by doing so.”
“The red-hot housing market of the last 18 months was also a great opportunity for buy-to-let investors to sell properties and benefit from the equity they had built up.”
“Add that to a great rebound from the start of the pandemic for the stock market and HMRC has had a massive year for CGT bills,” Kinzett-Evans concluded.