Measure
The Chancellor has confirmed that the capital gains tax (CGT) annual exempt amount will be reduced from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024. This measure is forecast to raise £1.6 billion by the end of the 2027/28 tax year.
As confirmed in the 2021 Budget, the annual allowance for CGT was to be frozen at £12,300 from April 2021 until April 2026. The Chancellor has today announced that these amounts will be cut in subsequent tax years instead.
The freeze in the basic rate band also affects CGT liabilities, as individuals whose income is insufficient to utilise it in full may have CGT liabilities at 10% (18% for residential properties) rather than 20% (28% for residential properties).
The reduction in the CGT annual exempt amount means that a higher rate taxpayer who would have utilised the entire £12,300 annual exemption will pay up to £1,764 more CGT in 2023/24 and up to £2,604 more CGT in 2024/25 compared to 2022/23.
In addition to individuals, trustees are also affected by the change, having a CGT annual exempt amount which is (usually) equal to half the annual exempt amount that applies to individuals.
Individuals and trustees who make capital gains.
The CGT annual exempt amount will be reduced to £6,000 from 6 April 2023 and £3,000 from 6 April 2024. The government has not yet commented on whether the annual exempt amount will increase in line with inflation or be frozen after the 2024/25 tax year.
As the government did not want to raise the rates of income tax or NICs in line with the Conservative Party’s manifesto pledge, introducing changes to CGT was one of the revenue raising options available. This measure is expected to raise £1.6 billion by the end of the 2027/28 tax year.