Surprising reduction in CGT allowance will increase admin more than tax receipts
Posted on: November 18th 2022 · read
The reduction in the Capital Gains Tax (CGT) allowance means many small gains will now have to be reported to HMRC, increasing compliance costs without boosting tax receipts significantly.
The reduction in the annual allowance for CGT was a surprise. The previous allowance meant many small gains did not need to be reported to HMRC. The reduction will increase the compliance burden for many smaller investors and also owners of second properties who may wish to sell post April 2023.
The increase in taxation from this measure will not be great, so the main impact will be an extra administration burden as small investors deal with self-assessment returns and property investors deal with CGT returns. However, with the increase in the Bank of England base rate, we should see some property investors looking to exit the market, and the decrease in annual allowance will see their overall net profit reduce if they sell after 6 April 2023.
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