The Treasury has experienced a significant windfall from Capital Gains Tax (CGT) following a series of tax changes that have brought more investors into the tax net. New figures from HMRC reveal that CGT receipts reached nearly £24.3 billion in the 2025/26 tax year, marking a staggering 77% increase compared to the previous year. Over the past decade, receipts have soared by 244%, highlighting how this tax has become an increasingly lucrative revenue source for the government.
Annual allowance cut fuels surge
Experts attribute the surge primarily to the dramatic reduction in the annual CGT allowance, which has been slashed from £12,300 in 2022/23 to just £3,000 today. This means investors can now make far smaller profits before facing a tax bill. Additionally, higher tax rates introduced in October 2024 have further boosted the Treasury's intake.
Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, commented: "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 shrinking allowance has played a major role in pushing more people into paying the tax.
How CGT works and rate changes
CGT is charged 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. In October 2024, rates were increased, with the lower rate rising from 10% to 18% and the higher rate increasing from 20% to 24%.
Analysts also believe some investors rushed to sell assets ahead of Labour's Budgets amid fears that CGT rates could rise further, helping to swell 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."
Fiscal drag and tax shelters
HMRC states that individuals are entitled to a tax-free CGT allowance of £3,000 before tax becomes payable on gains. Financial experts advise that investors can reduce or even avoid CGT by making full use of tax shelters such as ISAs and pensions, where investments are protected from capital gains tax. The latest figures underscore the growing impact of fiscal drag, with frozen tax thresholds and reduced allowances pulling increasing numbers of people into higher taxes even when rates themselves remain 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."
