A £24bn CGT haul presents a taxing dilemma

The government brought in a record £24.2 billion in capital gains tax (CGT) during the 2024/25 fiscal year, up 89% on a year earlier, according to official figures published yesterday. The tax haul came from £127 billion in gains – also a record.

Some 584,000 people paid CGT during the year, up 45% compared to the same period a year earlier, following the increase in CGT rates in the October 2024 Budget.  Provisional figures for 2025/26 show about £1.9bn in CGT was paid on property disposals, down about 14% compared to the same period a year earlier. This is likely due to sales being brought forward ahead of the 2024 Budget and the changes to stamp duty that came into force the following April.

Tellingly, 45% of GCT taxes came from those who made gains of £5 million or more during 2024/25, which is less than 1% of CGT taxpayers.

Sitting on assets

The government is mulling more changes to CGT in the upcoming budget. Will the record 2024/25 haul act as an incentive, or will the reliance on a very small group of individuals prompt some caution at the Treasury?

Senior allies of Burnham have backed bringing capital gains tax into line with income tax bands, according to the Times. This would mean bringing the 18% and 24% rates currently paid on gains into line with income tax bands of 20%, 40% and 45%. For someone in the 45% income-tax band, the top rate would rise from 24% to 45%; a £1 million gain would generate roughly £210,000 more CGT before allowances and reliefs.

But the behavioural impact of such a change could be huge, both in terms of wealth flight or investors sitting on assets to avoid realising gains. The Treasury previously estimated that a ten-percentage-point increase in the higher rate of capital gains tax – so from 24% to 34% – would cost the exchequer about £3.6 billion by 2028/29.

Of course estimates like that are highly uncertain, which is another reason why relying on taxing the wealthy to maintain a wafer-thin amount of headroom relative to the government's self-imposed fiscal rules is so risky. Even the Office for Budget Responsibility has warned that "higher earners’ behavioural responses to tax changes are more uncertain and potentially higher than assumed in costings... a growing reliance on this small and mobile group of taxpayers therefore represents a fiscal risk."

Monumentally stupid

Aligning CGT rates with income tax is one of several levers the government is considering pulling in October. For a well-timed episode of Housing Unpacked, Tom Bill speaks to James Quarmby, tax lawyer and head of private wealth at Stephenson Harwood about the state of government tax policy, the impact of the changes to the non-dom regime, and what feasible options the Treasury has to raise revenue.

Quarmby reckons that the OBR's initial estimate that 20% to 30% of non-doms would leave following the April 2025 abolition of the non-dom regime, including the loss of inheritance-tax protections for offshore trusts, has been "broadly accurate". From a fiscal perspective, not all non-doms were equal. Quarmby is of the view that departures have been concentrated among the wealthiest, and the cost to the Treasury is likely to be somewhere between £1bn and £4bn.

The proposed changes to CGT would be near the top of Quarmby’s list of measures likely to drive more non-doms out of the UK. He describes aligning CGT with income tax as “a monumentally stupid thing to do”, while the “behavioural response to a wealth tax would be immediate and massive”, he adds.

Other options are narrowing. Quarmby argues that further increases to inheritance tax, new levies on non-doms, stamp duty and VAT have largely run out of road. Income tax, however, offers more scope. The government could introduce additional rates between the existing thresholds, he says, pointing to Scotland, where a more graduated system has created several additional bands. That could potentially be done without technically breaching the government’s manifesto commitment not to raise the main rates of income tax, “though this government isn’t shy of breaking manifesto commitments," he adds. Listen at the link above for more.

A busier autumn?

Early signs of an autumn bounce in the UK property market are emerging. Sales agreed remain 6% lower than a year ago, but the gap is beginning to close, according to Zoopla's latest house price index. Searches for homes are now 7% higher than last year, their strongest annual increase for 12 months.

For the first time since August 2025, searches are higher than a year ago across every region and country of the UK.The strongest increases have been recorded in the South East (+8.9%) and East of England (+8.5%), while the North West has seen the smallest rise (+0.7%).

The scale of any recovery will hinge to a large degree on the path of mortgage rates during the coming weeks. Average five-year fixed mortgage rates have risen from below 4% in January to around 4.8% today. A buyer who could afford a £200,000 mortgage at the start of the year can now borrow around £182,000 for the same monthly repayment – a 9% reduction in buying power.

Elsewhere in the property market – the Institute for Fiscal Studies is the latest group to weigh up whether rent controls work. 'No' is still the answer.

In other news...

Saudi Arabia shakes up flagship real estate project (FT),