Maintaining the annual exempt amount for Capital Gains Tax
Published 3 March 2021
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Who is likely to be affected
Individuals, trustees of settlements and the personal representatives of deceased persons who have capital gains.
General description of the measure
This measure maintains the Capital Gains Tax annual exempt amount at its current amount of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years 2021 to 2022 up to and including 2025 to 2026.
Policy objective
The annual exempt amount sets the level of capital gains that taxpayers can realise before paying Capital Gains Tax in a given tax year. Maintaining this allowance at its 2020 to 2021 levels is a responsible decision that helps ensure that the post-crisis task of putting the public finances on a sustainable path is no harder than it needs to be.
Background to the measure
This measure was announced at Budget 2021.
Detailed proposal
Operative date
This measure will have effect in relation to gains accruing on or after 6 April 2021.
Current law
The rules for the annual exempt amount are at sections 1K and 1L, and Schedule 1C to, the Taxation of Chargeable Gains Act (TCGA) 1992. Section 1L provides that the annual exempt amount, which is presently set at £12,300, is increased annually in line with increases in the Consumer Prices Index (CPI), rounded up to the nearest £100. Schedule 1C provides that the annual exempt amount available to most trustees of settlements is one half of the amount available to individuals.
Proposed revisions
Legislation will be introduced in Finance Bill 2021 to maintain the annual exempt amount at its present levels for tax years 2021 to 2022, 2022 to 2023, 2023 to 2024, 2024 to 2025 and 2025 to 2026.
Summary of impacts
Exchequer impact
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| - | negligible | +5 | +10 | +20 | +30 |
These figures are set out in Table 2.1 of Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2021.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
As a result of maintaining the annual exempt amount at current levels, the maximum additional liability an individual will have at the highest Capital Gains Tax rate is £28 compared to if the annual exempt amount increase with CPI.
It is estimated that around 300,000 individuals could be impacted by the measure in 2021 to 2022. Most of those affected will be existing Capital Gains Tax payers. The measure will bring around 25,000 individuals into the scope of Capital Gains Tax in 2021 to 2022.
The measure is not expected to impact on family formation, stability or breakdown.
Customer experience is expected to stay the same for existing taxpayers. For new taxpayers the customer experience could be negatively impacted because they may have to register for self assessment for the first time. However, to support these taxpayers, online guidance and a dedicated Capital Gains Tax helpline is available.
Equalities impacts
It is not anticipated that this measure will impact on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations.
Operational impact (£m) (HMRC or other)
The operational impacts of implementing this measure are considered to be negligible.
Other impacts
Other impacts have been considered and none has been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax receipts.
Further advice
If you have any questions about this change, please contact Aatif Patel on Telephone: 03000 510 915 or email: cgtbudget@hmrc.gov.uk.