Taxpayers must be careful how they report CGT this year

Taxpayers with capital gains liabilities that they need to declare in their self-assessment tax return need to take extra care this year to avoid receiving a penalty from HMRC. Changes made to the Capital Gains Tax (CGT) rates part-way through the 2024/25 tax year mean it will be more complicated to determine exactly what rate applies to each gain and, unfortunately, HMRC’s self-assessment software won’t calculate the correct amount for you. Instead, you will need to do this yourself or with your accountant, and the timing of each transaction will make a difference. So, you will need to speak to your accountant to either help you file your return, or if your return has already been filed, to check that the calculation you have made is correct, as the sooner you remedy any underpayments, the better it is for you.

How did the rates change?

The CGT rates increased from October 30, 2024, which was the day of the Autumn Budget that year, and they applied to the disposal of assets, except for residential property and carried interest. On that day, the rates increased as below:

• 10% to 18% for basic rate taxpayers.
• 20% to 24% for higher-rate taxpayers.

This created the complication for this year, as taxpayers need to split gains they made at different dates and then calculate the right amount of tax due, based on the relevant rates. They also need to allocate any losses and the annual exemption to gains realised either on or after October 30, to make sure they maximise their tax relief. Yet despite the change being made by the Government a relatively long time ago, as already mentioned, HMRC’s software cannot do the calculation for you. So, there is an adjustment on the self-assessment form, in box 51, which you should have used to pay the correct amount of tax. If you didn’t, or you haven’t explained your calculations on the form in box 54, then you might need to make a change after filing. This is where your accountant will be able to help you.

Is there any way I can check my calculation?

Yes, HMRC has made a specific adjustment calculator available. But there is one other thing HMRC will be expecting in your tax return – you would need to have included a disclosure if you entered an unconditional contract before October 30, 2024, if it completed after that date. Elsa Littlewood, private wealth tax partner at BDO, said: “Changing the CGT rates part way through the year has the potential to be a real banana skin for those completing the form and can be particularly tricky for those doing so without professional help. There is a risk that people unfamiliar with the rate changes will unwittingly input the wrong information as the self-assessment form will not automatically calculate the right CGT liability. “It is helpful that HMRC have released a calculator that can be used to work out the adjustment to capital gains tax, but it would have been better if this was integrated within the tax return software. “We would hope that HMRC would not charge penalties if tax returns submitted using HMRC’s software are incorrect and the amount unpaid is minor. But there is a risk of mistakes being made and it could lead to a flurry of disputes with HMRC later. Even if you have already submitted your self-assessment form, you may wish to go back and double check it to ensure it’s right.”

We can help you

If you have already filed your self-assessment tax return and think it might be worth revisiting it with us to check everything is correct, then please contact us and we will do everything we can to assist you.