In 2024/25, taxpayers reported £127 billion of capital gains, an increase of 82% in a single year. The resulting Capital Gains Tax (CGT) bill reached a record £24.2 billion, up 89%. The number of people paying CGT also reached a record high: 584,000 taxpayers, 45% more than in the previous year.
At first sight, this might suggest that investors and business owners simply had an exceptionally profitable year. The reality is rather more interesting.
Tax policy is changing behaviour
The 2024/25 tax year was an unusual one for CGT. There was considerable speculation ahead of the October 2024 Budget that CGT rates could rise. When the Budget arrived, the main rates were indeed increased, from 10% and 20% to 18% and 24%, with effect from 30 October 2024.
At the same time, business owners knew that the tax rate applying to disposals qualifying for Business Asset Disposal Relief (BADR) was due to increase from April 2025. For somebody already contemplating selling a business, shares or other investments, those announcements created an obvious incentive to consider completing a transaction sooner rather than later.
That is one of the recurring features of capital taxes: the timing of a disposal is often within the taxpayer's control. Changes, or even anticipated changes, in tax rates can therefore have a dramatic effect on when gains are realised. Some of the extraordinary £127 billion of gains reported in 2024/25 are likely to represent transactions brought forward rather than economic activity that would otherwise have happened in that particular year. The figures are therefore a useful reminder that tax policy does not simply determine how much tax is collected. It can change taxpayer behaviour too.
More people are being brought into the CGT system
There is another important story within the figures. The CGT Annual Exempt Amount - that is the amount of gains an individual can realise before CGT becomes payable - has fallen dramatically. It was £12,300 in 2022/23, reduced to £6,000 in 2023/24, and then to just £3,000 from April 2024. HMRC estimates that the April 2024 reduction alone brought as many as 76,000 additional taxpayers within the scope of CGT. Taken together, the two reductions may have brought as many as 163,000 additional people into the CGT system.
This matters because CGT is no longer something relevant only to people making very substantial disposals. Someone with a relatively modest investment portfolio can now exceed the £3,000 exemption simply by selling investments which have performed well over a number of years. There is no adjustment to the gain to account for the effects of inflation, often just a simple calculation of proceeds less cost. It makes keeping proper records of acquisition costs, improvements, transaction costs and previous disposals increasingly important.
CGT remains extraordinarily concentrated
While more people are paying CGT, the amount of tax collected remains heavily concentrated among a very small number of taxpayers. HMRC reports that 45% of all CGT was generated by taxpayers making gains of £5 million or more and those taxpayers represent less than 1% of everyone paying CGT.
So two things are happening simultaneously: the CGT net is becoming wider, catching increasing numbers of relatively modest investors, while the overwhelming majority of the money continues to come from a comparatively small population making very large gains.
Business Asset Disposal Relief remains significant
Business Asset Disposal Relief also featured prominently. Some 61,000 taxpayers claimed BADR on £18.5 billion of gains during 2024/25, producing CGT liabilities of £1.8 billion.
BADR can apply when qualifying business owners sell all or part of their business or qualifying shares in their personal company, subject to detailed conditions and a lifetime limit. The rate applicable to qualifying BADR gains increased from 10% to 14% from 6 April 2025 and increased again to 18% from 6 April 2026.
For entrepreneurs considering a business sale, this reinforces an important point: tax planning should ideally start well before a transaction. It is not simply about calculating the tax once a deal has been agreed. The ownership structure, qualifying period, share rights and nature and timing of a transaction can all affect the eventual tax treatment.
What can we learn from the record £24.2 billion tax bill?
Perhaps the most interesting conclusion from HMRC's figures is that CGT receipts are influenced by three quite different forces.
First, asset values matter. Rising businesses, shares and other investments naturally create larger potential gains.
Second, thresholds matter. Reducing the Annual Exempt Amount from £12,300 to £3,000 has brought a substantial number of additional taxpayers into the system.
Third, and perhaps most importantly, behaviour matters. Unlike employment income, taxpayers frequently have some choice over when a capital gain arises. Announced and anticipated tax changes can therefore bring transactions forward, or encourage people to postpone them. Some taxpayers might even defer crystallising gains until they have left the UK, perhaps avoiding UK CGT altogether.