Landlords and second-home owners boost CGT revenues

01 February 2022
In the face of falling tax revenues during the pandemic, capital gains tax (CGT) has been bucking the trend with receipts increasing by 13.3 per cent, generating a year-on-year increase of £1.3 billion for the year to 31 March 2021. That brought the total CGT revenues for that year to £11.3 billion. We now have a clearer picture of how much landlords and second-home owners have been contributing to those figures.

From 6 April 2020, new rules require taxpayers to report and pay any CGT more quickly following the sale of a residential property. At first, this needed to be done within 30 days of completing the sale. However, this was extended to 60 days following criticism that the timeframe was too short, and a significant number of taxpayers were hit with penalties for failing to meet the deadline.

These new reporting requirements primarily impact those with second homes and buy-to-let landlords, as those selling their main home typically do not have any liability to CGT. As a result, it is now easier to identify how much CGT is paid on sales of second homes and rental properties.

Historically, most CGT revenues have been received by HMRC in the months of January, February and March. That is in line with the traditional 31 January deadline for tax returns and associated tax payments. The period from April to December each year was previously barren ground for receiving CGT revenues.

Since the introduction of the new reporting requirements for residential property disposals, the picture has changed, with HMRC receiving more CGT revenues throughout the year. HMRC is receiving more, and more often. The increase is dramatic: in the period from April 2020 to December 2020, HMRC receipts from CGT were £470 million (up from £45 million for the same period in 2019).

In total for the year to 31 March 2021, statistics indicate that £1 billion in CGT revenues was received because of the new CGT reporting requirements, largely contributed by second-home owners and landlords.

The trend for the current tax year is even more dramatic. It remains to be seen what the figures will be for the year to 5 April 2022 but, looking at the CGT collected in the months from April 2021 to December 2021, it is clear that HMRC is in for another bumper year with property sales boosting the Treasury’s tax coffers. Latest figures show that £1.45 billion of CGT was collected in the period from April 2021 to December 2021, a staggering increase from the £45 million received in the same period in 2019 and more than three times the £470 million received for the same period in 2020.

It is clear from these figures that the Stamp Duty Land Tax (SDLT) holiday has not only bolstered SDLT receipts by artificially inflating the property market, but super-charged CGT revenues. Based on current figures, landlords and second-home owners will be propping up the Chancellor’s coffers to generate a record amount of CGT revenues for the 2021/22 tax year.