HMRC have released a calculator for those affected by the 2024-25 change in Capital Gains Tax (CGT) rates. Taxpayers using HMRC's online tax return filing service may need to use this tool to calculate a CGT 'adjustment figure', as the tax return calculation will not automatically calculate CGT at the new main rates where they apply.
Background
Changes to Capital Gains Tax (CGT) rates were announced at the 2024 Autumn Budget, from 30 October 2024 (during the 2024-25 tax year):
- The lower rate of CGT increased from 10% to 18%.
- The higher rate of CGT increased from 20% to 24%.
- The rate of CGT that applies to trustees and personal representatives increased from 20% to 24%.
The rates for residential property gains remain at 18% for basic rate taxpayers and 24% for higher rate taxpayers.
Taxpayers with disposals occurring before and after 30 October 2024 will be required to Work out any gains separately, calculating CGT at the different CGT rates.
Where does HMRC's calculator come in?
HMRC have confirmed that for individuals, trustees, and personal representatives who submit their Self Assessment returns via HMRC's software, an additional adjustment will need to be entered on the return for gains made on or after 30 October 2024.
- This is because HMRC's software will be unable to calculate gains at two separate rates and will instead be set to calculate all gains at the lower (pre-30 October 2024) rates of tax and not the new higher rates.
- An adjustment is therefore required to be entered into the tax return to account for the higher rate of CGT for non-residential gains on or after 30 October 2024.
- The adjustment needed will be worked out by the new calculator, which is now available online.
- HMRC require the calculator's result to be saved and added to the Self Assessment return as an attachment.
- No adjustment is required if the only gains made in the year were before 30 October 2024, as any tax liability on these gains will be calculated at the correct rates.
It is expected that commercial software will be able to calculate gains at the different applicable rates and make the necessary adjustments automatically.
Using the calculator
To use the calculator, taxpayers will need to have the following:
- Disposal date.
- Details of gains made.
- Taxable income for the year.
- Current and previous years' losses.
- Details of pension or gift aid contributions for the year.
If an adjustment is not entered on the tax return to account for the separate rates, the return submitted will be incorrect, with an underpayment of CGT.
HMRC have not indicated how they will deal with taxpayers who fail to make the adjustment.
- HMRC can issue penalties for the submission of Incorrect returns and generally 'ignorance of law' is not a Reasonable excuse for inaccuracies.
- Unless HMRC’s software specifically flags the issue when taxpayers are completing the return, many taxpayers will likely be unaware of the requirement to make the adjustment.
Useful guides on this topic
CGT: How to calculate a capital gain or loss
How do you calculate a capital gain or loss? What costs are deductible? Can you set losses against capital gains?
CGT: Residential property gains
The definition of 'Residential Property' is important for Capital Gains Tax (CGT) purposes when considering how a gain is reported, when tax is paid and the rates of tax that apply. What is a Residential Property gain?
At a glance: Reporting CGT when & how?
How do you report your capital gains? What return do you use? There are different ways for individuals to report capital gains depending on whether you are resident or non-resident, and whether you are in or out of Self Assessment.
CGT: Reliefs, disposal of a business or its assets
Which Capital Gains Tax (CGT) reliefs apply when a person replaces or disposes of an asset used by a business, the whole or part of a business, or shares in a company?
External link
HMRC: Work out your Capital Gains Tax adjustment for the 2024 to 2025 tax year
