The latest tax receipt statistics published by HMRC highlight that in the vast majority of cases, the government’s tax revenues are moving in one direction: upwards. There has however been one notable exception to this general rule in recent years, as capital gains tax (CGT) receipts have seen a significant decline from a high of £16.9bn in the 2022/23 financial year to £13.1bn in 2024/25. That represents around a 23% fall in CGT receipts in just two years.

The reasons for this are varied but, contrary to some reports, this decline is unlikely to primarily be the result of individuals leaving the UK. In establishing the reasons for these lower tax revenues, it is important to understand that CGT receipts are in part a delayed reflection of the economy from a couple of years ago. The UK tax year runs from 6 April to 5 April, but the majority of CGT liabilities are typically paid by 31 January following the end of the tax year.

This lag means that lower CGT receipts in the 2024/25 financial year are largely reflective of the disposals made in the 2023/24 tax year, a challenging period economically for many which is likely to account for lower levels of gains and disposals. Illustrating the point, a disposal in April 2023 may not have required any associated CGT to be paid until 31 January 2025.

Some might reasonably assume that this decline in CGT revenues may continue but this may prove to be a common misconception. Indeed, there are signs that of all the taxes paid to the Exchequer, CGT could see the largest percentage increase in receipts in the current financial year.

Recent data from HMRC has already shown a monthly rise in CGT receipts from the start of the current tax year to date, compared to the same period the year before. The stamp duty land tax increases effective from 1 April 2025 are likely a contributing factor as residential property sales were rushed through, with CGT needing to be reported and paid on disposals of UK residential property within 60 days of completion.

The CGT generated from property disposals will contribute to the expected windfall, but the intense speculation of tax changes ahead of the Autumn Budget 2024 is likely to be a key driving factor, with the clearest indication known by 31 January 2026. The heightened uncertainty regarding rising CGT rates in last year’s budget caused many to accelerate transactions they might not otherwise have undertaken, with some deals completing in the last minutes before budget day. Data from the Office for National Statistics supports this with the value of domestic mergers and acquisitions reaching a significant peak of £6.4bn in the last quarter of 2024. That is more than the total value of comparable mergers and acquisitions in the second half of the 2023/24 financial year.

The Office for Budget Responsibility (OBR) is also forecasting for CGT receipts to rise sharply, with modelling based on projected increases to property and equity prices. As noted, except for residential property sales, CGT receipts are based on historical market movements so the current volatility seen in global markets will not have a significant impact on tax revenues in the current financial year. In light of that, the OBR is anticipating that CGT receipts will increase to £19.7bn in the current financial year, an increase of around 50% from 2024/25.

That is around 16.5% higher than the previous record year for CGT tax revenues. Even if this modelling is optimistic, there is a lot of room for error and 2025/26 could still represent a record year for CGT receipts.

So whilst the narrative around CGT receipts may currently appear pessimistic, that may ultimately prove to be short-lived and the Chancellor will be hoping to receive an anticipated windfall. The question then is whether this can be sustained or whether domestic and geopolitical affairs will put the brakes on CGT receipts in future years.