There is a risk that changes to Capital Gains Tax rates announced in the October 2024 budget may be overlooked or incorrectly applied by those completing their 2024/25 tax returns. In addition to the complication of a mid-financial-year tax rate change, many taxpayers are unaware that HMRC’s online tax return tool currently does not adequately account for the rate change.
HMRC has recently notified a number of taxpayers whose early submissions were found to be incorrect, requesting that the mistakes be corrected, and many more taxpayers are likely to receive similar letters in the coming weeks. With the deadline for self-assessment tax returns only a few weeks away (31st January 2026), it is vital that taxpayers check their submissions for accuracy, with HMRC stating “self-assessment customers will have everything they need to get their tax right”, indicating that mistakes could incur penalties.
Why are mistakes being made?
Tax rate changes usually take effect at the start of a financial year; however, the Chancellor of the Exchequer, Rachel Reeves, announced changes to Capital Gains Tax rates that would take effect as of her announcement on 30th October 2024. The timing meant that taxpayers declaring gains on asset sales in the 2024/25 financial year may be subject to different rates depending on whether the gain was realised before or after the rate change. Investors, particularly those trading in cryptocurrency, may find it difficult to determine the exact dates of transactions due to the volume of activity.
However, HMRC expects tax returns to be submitted using the correct rates, even though it has acknowledged that its online calculator has not been updated to reflect the rate change on 30th October 2024.
How to check that you are paying the correct amount of CGT
Below is a brief outline of the changes that came into effect for CGT on profits from the sale of non-residential assets. You can read about it in more detail in our article, “Capital gains tax raised in the Autumn Budget”.
How CGT rates changed on 30 October 2024
- Basic-rate taxpayer CGT rate increased from 10% to 18% for non-residential chargeable assets, including investments
- Higher-rate taxpayer CGT rate increased from 20% to 24% for non-residential chargeable asset,s including investments
Profits derived from the sale of residential property that was not your principal residence are also subject to CGT, but the rates remained unchanged at 18% and 24% for basic rate and higher rate taxpayers, respectively. Residential property that is your principal residence remains free from CGT when sold for a profit. The CGT tax allowance also changed in 2024/25, reducing from £6,000 to £3,000 per person. If not known, this may also cause mistakes in tax calculations. For those who made gains before and after the date of the rate change, applying the CGT allowance to gains that attract a higher rate of interest may be prudent, and some may require advice from an accountant or tax specialist in order to avoid errors or overpaying tax.
Taxpayers completing their own self-assessment tax returns will need to carefully calculate CGT on non-residential assets. HMRC points taxpayers to the CGT online rate adjustment tool for gains arising after 30th October 2024.
What to do if you have already submitted an incorrect tax return
If your tax submission is incorrect, HMRC will likely contact you with details of the mistake, but you can use HMRC's Self Assessment Digital Assistant to address the mistake too. Alternatively, vist the contact page to find the best way of raising this as soon as possible.
Will tax errors be penalised?
While HMRC treats each case on its own merits, its communications indicate that taxpayers will be held responsible for ensuring tax returns are correct. It is useful to note that penalties can be charged at up to 100% of the extra tax due as a result of the mistake and interest is charged on unpaid tax as well as penalties at a daily rate of 7.75%.
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