Capital Gains Tax changes could require a Self Assessment adjustment
In the Autumn Budget 2024, the government announced a significant mid-year change to Capital Gains Tax (CGT) rates. This has created a technical issue with HMRC’s tax software, putting some taxpayers at risk of underpaying CGT unless they take proactive steps. To help address the issue, HMRC has launched a new CGT calculator.
What were the changes to CGT rates?
On 30 October 2024, the government announced new CGT rates, effective immediately from that date:
- An increase from 10% to 18% for the lower rate of CGT
- An increase from 20% to 24% for the higher rate of CGT
As the changes happened in the middle of the tax year, gains made pre-30 October 2024 face a lower rate of CGT to those made from that date onwards. This is where the problem arises.
The software which HMRC uses is not able to calculate gains at two different rates and is set up to use the lower rate from before the 2024 Autumn Budget, potentially putting individuals at risk of underpaying CGT.
Due to this, HMRC has confirmed that an adjustment will likely need to be made on Self Assessment tax returns in relation to gains made on or after 30 October 2024.
What action could be required?
The result from HMRC’s online calculator will need to be added as an attachment to the 2024/25 Self Assessment return, which is due by 31 January 2026. While this may seem like a long distance away, by staying ahead of the deadline, you can save time, stress, and even potentially money.
There is some information that you will need to have to hand in order to use the calculator:
- Date of disposal
- Amount of gains made
- Taxable income for the tax year
- Capital losses for the current and previous tax years
- Detail of any pension or Gift Aid payments for the tax year
Penalties for incorrect returns
If the adjustment is not made to the tax return, it will potentially result in an underpayment of CGT. HMRC is then able to issue penalties for returns which have been incorrectly submitted. This would likely fall under the lack of reasonable care section of penalties which can result in a penalty of between 0% and 30% of the extra tax which is due.
This situation follows a recent issue involving National Insurance error on some 2024/25 Self Assessment returns, underlining the importance of reviewing submissions carefully.
We’re here to help
Although the adjustment process is relatively straightforward, capital gains calculations can be complex, particularly when considering certain transactions taking place on or around 30 October. If you have concerns about your capital gains position or need assistance with completing your 2024/25 Self Assessment return, please speak to a member of our specialist team via the form below.
