SOUTH WEST LEGAL AND ACCOUNTING LIMITED blog

HMRC has published its latest Capital Gains Tax statistics, and the headline numbers are striking.

SWLA Accounting — Sun, 30 Aug 2026 07:15:39 GMT

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.

The Benefits of a Fractional CFO for Growing SMEs

SWLA Accounting — Fri, 28 Aug 2026 17:21:51 GMT

If you've been wondering whether your business needs financial leadership before it's ready for a full-time hire, you're not alone. A growing number of SMEs sit in an awkward middle ground, where it is too complex to run on gut instinct and a spreadsheet, but not yet big enough to justify a full-time Finance Director. A fractional CFO is often the answer to that gap, and it's worth understanding what the role actually involves before deciding if it's right for your business.

What is a fractional CFO?

A fractional CFO is an experienced finance professional who works with your business on a part-time, outsourced basis, providing senior financial leadership without the cost or commitment of a full-time executive hire. Rather than being in-house five days a week, they might work with you a few days a month, scaling up around specific events like fundraising, an acquisition, or a period of rapid growth.

Why growing businesses turn to a fractional CFO

There's usually a specific tipping point that prompts the search:

Revenue or complexity has outgrown what a bookkeeper or accountant alone can advise on
Cash flow has become harder to predict, or working capital is under pressure
Investors, lenders or a potential buyer are starting to ask harder financial questions
The business is preparing for fundraising, an acquisition, or a future exit
The owner is spending too much time on financial decisions instead of running the business

None of these necessarily means you need someone full-time. Often, what's actually needed is senior-level judgement applied periodically, not daily oversight.

What a fractional CFO typically covers

A good fractional CFO goes well beyond what a standard bookkeeping or compliance service provides. A comprehensive engagement should cover:

Cash flow forecasting and working capital management
Management accounts and board-level financial reporting
Budgeting, forecasting, and scenario planning
Pricing, margin and profitability analysis
Fundraising support, investor readiness, and financial due diligence
Strategic input on growth plans, acquisitions, or a future exit

How is a fractional CFO different from an accountant?

This is one of the most common points of confusion, and worth clearing up. An accountant typically focuses on compliance, such as bookkeeping, annual accounts, tax filings. Essentially making sure the numbers are accurate and submitted on time. A fractional CFO, on the other hand, sits a level above that, by using those numbers to guide decisions rather than just reporting on what's already happened. In practice, the two roles work best together.

Signs it might be time to consider one

A fractional CFO tends to make sense once a business has outgrown basic compliance support but isn't yet at the size where a full-time finance hire is justified. A few signals this stage has been reached:

Financial decisions are increasingly made without a clear view of cash flow or margins
Forecasting feels like guesswork rather than something grounded in real numbers
Growth has outpaced the financial structure supporting it

None of these alone is necessarily a dealbreaker, but together they're usually a sign the business would benefit from more senior financial input, even if only a few days a month.

How South West Legal and Accounting can help

Alongside our core accounting and legal services, we also help growing businesses access the kind of senior financial guidance a fractional CFO provides, without the cost of a full-time hire. We offer a free, no-obligation review of your current financial setup, giving you a clear picture of whether this kind of support would benefit your business. If you can associate with the problems above, feel free to get in touch, and we would be very happy to help.

Making Tax Digital: What SMEs and Sole Traders Need to Know

SWLA Accounting — Fri, 28 Aug 2026 16:42:08 GMT

If you've been wondering whether Making Tax Digital affects you this year, you're not alone. Making Tax Digital, or MTD, is HMRC's ongoing shift towards digital record-keeping and quarterly reporting, and it's no longer a distant future change. MTD for VAT has been mandatory since 2022, and MTD for Income Tax has now started rolling out too, in stages, based on income. Here's what's actually in effect, what's coming next, and what it means for your business.

Where things stand right now

MTD for VAT already applies to every VAT-registered business, regardless of turnover, requiring digital records and MTD-compliant software for VAT returns. The bigger recent change is MTD for Income Tax Self-Assessment (MTD ITSA), which became mandatory from 6 April 2026 for sole traders and landlords with qualifying income over £50,000. If that's you, you should already be keeping digital records and submitting quarterly updates rather than a single annual return.

The phased rollout - who's affected and when?

MTD for Income Tax is being introduced in stages, based on gross income from self-employment and/or property:

From 6 April 2026 - mandatory for qualifying income over £50,000
From 6 April 2027 - threshold drops to over £30,000
From 6 April 2028 - threshold drops further to over £20,000

Your income is checked against your most recently filed Self-Assessment return, so it's worth checking your figures now rather than assuming you're out of scope, particularly if you're close to a threshold.

What actually changes under MTD for Income Tax

Instead of a single annual Self Assessment return, affected sole traders and landlords now need to:

Keep digital records of income and expenses using MTD-compatible software
Submit a quarterly update to HMRC every three months
Submit a Final Declaration by 31 January, replacing the old annual return

Missing a deadline no longer results in a single fixed fine. A new points-based penalty system applies, where each missed submission adds a point, and penalties kick in once you reach the threshold. This, if not done on time, can costs business owners a lot.

How is MTD for Income Tax different from MTD for VAT?

This is one of the most common points of confusion, and worth clearing up. MTD for VAT has been running since 2022 and only affects your VAT returns, filed as usual. MTD for Income Tax is a much bigger shift. It replaces your entire annual Self-Assessment return with quarterly digital updates plus a year-end Final Declaration, and it applies based on your income from self-employment or property, not your VAT registration. It's entirely possible to be in scope for one, both, or neither, depending on your circumstances.

Signs it's worth getting ahead of this now

A few signals suggest it's time to act rather than wait for your mandatory start date:

Your income is close to one of the thresholds, and could tip you into scope sooner than expected
You're still relying on spreadsheets or paper records rather than cloud accounting software
You've never used MTD-compliant software and aren't sure what "compatible" actually means
You're unsure whether income from a second property or side business counts towards your threshold

None of these alone means you need to act immediately, but together they're usually a sign it's worth getting your bookkeeping in order before a deadline forces the issue.

Common questions we hear

A few things tend to catch business owners out. Wages, dividends, pensions and other PAYE income don't count towards your MTD threshold. It is only income from self-employment and property. Partnerships and limited companies aren't yet mandated under MTD for Income Tax, though this is expected to be considered in a future phase. And if your income sits below the threshold, you can still choose to join voluntarily, which some business owners do simply to get ahead of the transition before it becomes compulsory for them.

How South West Legal and Accounting can help

We support sole traders, landlords and small business owners through Making Tax Digital, from getting the right software in place to handling your quarterly submissions on your behalf, so nothing falls through the cracks. We offer a free, no-obligation review of your current setup, giving you a clear picture of whether MTD affects you now, or when it will. Feel free to get in touch, and we would be very happy to help.