Newly released data from HM Revenue and Customs (HMRC) indicates that Capital Gains Tax (CGT) receipts have soared as buy-to-let landlords unload property holdings due to increasing mortgage rates and fluctuating house prices. Research conducted by NFU Mutual reveals that CGT revenue reached £18.1 billion in the 2022/23 fiscal year, a significant £7 billion increase compared to two years prior. This surge means that the public is now paying more in CGT than in the much-maligned Stamp Duty.

The rising number of buy-to-let landlords selling property is largely responsible for the increase in CGT receipts. This trend is expected to continue, as the annual tax-free exemption for CGT has been reduced from £12,300 to £6,000, with plans to decrease it further to £3,000 in April next year.

Sean McCann, a Chartered Financial Planner at NFU Mutual, explains that various factors are contributing to the substantial growth in CGT receipts. “More buy-to-let landlords are offloading property because of increasing mortgage rates and are being hit based on the rise in the value of their property. With the value of the average UK property having increased by 75% over the last 10 years, many are facing substantial bills.”

CGT is levied when investors make gains on shares or properties that are not their primary residence. McCann notes that recent tax changes have prompted many landlords to expedite property sales to take advantage of higher tax-free exemptions. He also warns of potential CGT pitfalls, saying, “There are a number of CGT traps that people unwittingly fall into. Most notably, few people realise giving away property, shares, or other investments can trigger a tax bill.”

For instance, if a parent gifts property or a share portfolio to their children, it may be considered a disposal and be subject to CGT. Additionally, the gift could incur a subsequent Inheritance Tax bill if the person making the gift passes away within seven years.