Britons are being urged to check if they can benefit from certain savings tools as the number of people paying Capital Gains Tax surges.
New figures released by HM Revenue and Customs (HMRC) show Capital Gains Tax (CGT) receipts hit £14.4billion in 2022-23 with 369,000 people stumping up to pay the tax.
According to investment experts at AJ Bell, this equates to more than double the number of people who paid CGT 10 years ago.
This comes after the former Conservative government slashed tax allowances twice in two years.
As of the 2024/25 tax year, individuals must pay Capital Gains Tax on any profits over £3,000. In the 2022/23 tax year, it was £12,300.
However, there are “efficient” tools people can use to legitimately keep more of their wealth, an expert has said.
Laura Suter, director of personal finance at AJ Bell, said: “There is already a lot of speculation about Capital Gains Tax ahead of the October Budget, following the Chancellor’s admission that taxes will have to rise.
“While investors should avoid panicking and locking in gains at current tax rates purely based on speculation, they should consider whether there is merit in moving their assets into a tax-efficient environment.
“If they have investments with capital gains outside an ISA or pension, they can sell sufficient assets to reach the current CGT allowance of £3,000 and then re-buy them in an ISA – through a process known as a Bed and ISA.”
Ms Suter explained: “It means that they won’t pay tax on future gains and they are using up this year’s CGT allowance. You just need to make sure you have some of your £20,000 ISA allowance remaining.”
Equally, Ms Suter suggested people could move some assets to their partner.
She explained: “If they are not making use of their capital gains allowance, you could move assets to them to benefit from their tax-free limits. If they haven’t used their ISA allowance this year, you could transfer assets to them to then put into their ISA – known as a Bed and Spouse and ISA.”
The largest group of CGT payers are those aged 55 to 64, accounting for over a quarter of all taxpayers. By this age, they’ve had more time to build up investment or property wealth and are likely to sell their businesses before retiring, realising gains in the process.
Ms Suter noted that the number of people reporting gains declines after age 75, partly due to the smaller population in this age group and partly because CGT is eliminated upon death, providing an incentive to retain assets in later life.
However, she speculated: “The CGT exemption for a person’s estate once they die is another area that could look tempting for the chancellor.
“Currently, any capital gains are wiped out when someone dies, to avoid double taxation of both CGT and inheritance tax. But paring back or even abolishing this tax perk could be a big revenue raiser for the Chancellor.”
