Capital gains tax

Tax rates and allowances

As previously announced, the annual exemption will remain at £12,300 for the tax years 2021/22 to 2025/26.

No changes were announced to the rates of capital gains tax with the higher rate remaining at 20% and the basic rate at 10%. The 28% and 18% rates continue to apply to chargeable gains made on the disposals of residential property and the receipt of carried interest, however.

Equally, those awaiting a government response to the recent Office for Tax Simplification (OTS) reports on capital gains tax were left wanting, at least for now.

For a table of the main tax rates and allowances for 2022/23, see our HMRC tax rates and allowances page.

Dormant Assets Scheme expansion

The Dormant Assets Scheme (DAS) allows financial institutions to give money from dormant bank and building society accounts to good causes. Where amounts have been transferred into the DAS, holders of dormant accounts can make claims to the scheme’s administrators for repayment of the relevant amounts. The tax position of dormant account holders who successfully make such claims is the same as it would have been in the absence of the DAS, and specifically a transfer to the DAS does not give rise to a disposal for capital gains tax purposes, and statutory rights under the DAS are treated as the same asset as the rights that the account holder would originally have had against the bank or building society. Accordingly, a CGT disposal gain or loss only crystalises when proceeds are reclaimed or repaid to the dormant account holder, and not when a transfer is made into the DAS.

The current Dormant Assets Bill is set to expand the scope of the DAS to include additional classes of assets, allowing certain assets from the pensions, insurance, investment and wealth management and securities sectors to also be used for public benefit where asset owners cannot be located. The government announced in today’s Budget that section 26A of the Taxation of Chargeable Gains Act 1992 will be amended to match this broadened scope, such that when a relevant asset is monetised and the resulting cash proceeds included in the DAS, the gain or loss that would otherwise accrue for the relevant individual will only crystallise when that individual makes a successful claim for repayment of those proceeds. The change will take effect once the Dormant Assets Bill becomes law and the necessary commencement order has been made.

Extension of capital gains tax returns

As a result of changes introduced by Finance Act 2019, a UK resident making a disposal of UK residential property on or after 6 April 2019 which results in a gain liable to capital gains tax has been required to deliver a CGT return to HMRC and to make a payment on account of CGT within 30 days of completion of the disposal. In addition, a non-UK resident making a direct or indirect disposal of UK land on or after 6 April 2020 has been required to deliver a CGT return to HMRC (regardless of the type of property or whether tax is due) and to make a payment on account of any CGT within 30 days of completion of the disposal.

The government has announced that the Finance Bill 2021 will extend these 30 day time limits for filing CGT returns and making payments on account of tax to 60 days with effect for disposals that complete on or after 27 October 2021, in line with recommendations from the Office for Tax Simplification. The existing legislation will also be amended to make clear that, where a gain arises to a UK resident from the disposal of a mixed use property, it is only the gain attributable to the residential element which must be reported and for which payment on account of CGT must be made.