CGT changes create unwelcome challenges for taxpayers and HMRC

The Association of Taxation Technicians (ATT) is concerned that plans to reduce the annual exempt amount (AEA) for capital gains tax (CGT) from next year will bring more people into self-assessment, increasing complexity and administrative burdens for both taxpayers and the tax authorities.

The AEA allows an individual to make gains¹ of up to a certain amount (currently £12,300 for the current 2022/23 tax year) without paying CGT. At today’s Autumn Statement, the Chancellor has proposed that this will be reduced to £6,000 from April 2023, and then again to £3,000 from April 2024.²

These new rules will affect anyone who makes a disposal of assets including land, property (apart from those disposing of their main residence),³ shares and cryptoassets, as well as personal effects such as art or jewellery.⁴

Senga Prior, Chair of the ATT Technical Steering Group, said:

“The annual exempt amount has a number of practical advantages. It is simple, straightforward and widely understood. Having an initial capital tax-free allowance is also consistent with the personal allowance in income tax.

“We are concerned that HMRC are already failing to keep up with the current volume of taxpayer correspondence and increasing the numbers who need to file returns for CGT will only add to these burdens. Taxpayers often find dealing with CGT more challenging than income tax because they are dealing with it infrequently and do not therefore build up knowledge and experience of the rules or understand how to report their gains.”