The soaring amount the government is raking in from investors was brought home in stark terms this week with new figures on the amount raised by Capital Gains Tax alone.
As we report on Financial Planning Today, total Capital Gains Tax (CGT) receipts collected by the government in the 2024/25 tax year soared by an astonishing 89% to £24.2bn.
At the same time the number of CGT taxpayers in the year leapt 45% year on year to an all-time high of 584,000, according to annual HMRC data published this week. London and the South East of England accounted for half of the total gains reported (49%) for the year.
The main reason for this was the Treasury’s decision to increase Capital Gains tax rates during the 2024/25. The general CGT rates were increased 10% to 18% for basic rate taxpayers and 24% (from 20%) for higher and additional rate taxpayers.
The annual exempt amount is now just £3,000 per individual and will be the same for the 2025/26 tax year. It’s worth remembering this has been slashed from £12,300 in the 2021/2022 tax year. I think this is known in the trade as "a squeeze."
So we’ve seen many more people dragged into the CGT net and those now in the net paying far more than they did a few years ago but is this fair?
Many will say that these are investors who have made handsome profits and deserve to pay more tax but all the changes have done is make them poorer and penalise them for making smart decisions. I also fear the trend of taxing investment success is also only going one way - more tax on investors and reduced CGT allowances.
Our new Chancellor John Healey has an opportunity in his upcoming Budget in October to stop this slide into a damaging high tax / low growth economy.
Many experts have said that he has little room for manoeuvre. I don’t accept this. He is limited only by own own imagination and by his need to convince new PM Andy Burnham of any changes. In charge of one of the world's biggest economies he has plenty of room for change.
If there is anything he needs it is imagination and a desire to get the sluggish UK economy moving again.
Rewarding investors and entrepreneurs is one way to do this. Make it worthwhile working hard and enjoying the fruits of your labours and people will respond, I have no doubt. Tax people into oblivion and they will respond accordingly.
• I was surprised this week to read that one failed firm has partly blamed the Consumer Duty for its collapse. The addition burden of the Duty forced the firm to review its business practices which made it less profitable. It will be interesting to see if other failed firms blame the Duty for their demise.
Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and daily news. This topical comment appears most weeks, usually on Fridays but occasionally other days. Email: