HMRC key tax allowance cut update as income surges

HMRC key tax allowance cut update as income surges The Government has enjoyed a huge windfall from Capital Gains Tax The Treasury has reaped a substantial windfall from Capital Gains Tax following a raft of tax changes that have ensnared more investors. Fresh HMRC data reveals Capital Gains Tax (CGT) receipts reached nearly £24.3 billion in the 2025/26 tax year, a remarkable 77% rise on the previous year. Over the last decade, receipts have soared by 244%, highlighting how the levy has become an increasingly profitable revenue stream for the Government. Experts attribute the spike to the dramatic slashing of the annual CGT allowance, which has been reduced from £12,300 in 2022/23 to merely £3,000 today. The allowance reduction means investors can now make far smaller gains before incurring a tax bill, while higher tax rates introduced in October 2024 have further swelled the Treasury's coffers. Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, said: "CGT is proving a decent cash machine for the taxman. Recent HMRC data revealed that last tax year CGT added just under £24.3 billion to the public purse - up 77% on the previous tax year. Rewind a decade to 2015/16 and CGT receipts have skyrocketed by 244%." She added that the dwindling allowance has been instrumental in dragging more people into paying the tax. "A major driver is the sharp reduction of the annual CGT allowance, now just £3,000, down from £12,300 in 2022/23. This means more people are pulled into paying CGT and on a bigger chunk of their gains." CGT is levied on profits made when selling assets such as shares, investment funds and second properties. It can also apply when assets are gifted to someone other than a spouse or civil partner. Simultaneously, rates were raised in October 2024, with the lower rate climbing from 10% to 18% and the higher rate jumping from 20% to 24%. Experts also suggest some investors hurried to offload assets before Labour's Budgets due to concerns that CGT rates could increase further, contributing to boosted receipts. Ms Stinton said: "Some people likely accelerated sales of long-term assets ahead of Labour's recent Budgets, amid speculation that CGT rates could rise - choosing to lock in rates they knew, rather than risk paying more later." HMRC states people are entitled to a tax-free CGT allowance of £3,000 before tax becomes due on gains. Financial advisers say investors can reduce or even eliminate CGT by maximising tax shelters such as ISAs and pensions, where investments are shielded from capital gains tax. The latest data underscores the mounting effect of so-called fiscal drag, with frozen tax thresholds and reduced allowances dragging growing numbers of people into paying higher taxes even when rates themselves stay unchanged. An HM Treasury spokesperson said: “The fair and necessary decisions we made at this Budget and the last mean we can deliver on the country’s priorities – cutting waiting lists, cutting debt and borrowing, and cutting the cost of living. “Capital Gains Tax on assets such as investments and additional properties is separate from the tax on income, with workers with a low or average income paying tax at a historically low level and benefitting from the highest Personal Allowance among the G7.”