Thousands of investors could face penalties for unknowingly underpaying capital gains tax because the taxman’s software cannot cope with rate increases announced in last year’s budget.
Rachel Reeves, the chancellor, increased capital gains tax (CGT) on most assets and raised the rates from 10 to 18 per cent for basic-rate taxpayers and 20 to 24 per cent for higher-rate taxpayers. The changes took effect from October 30, 2024.
The rate investors must pay on gains in the 2024-25 tax year will depend on when they sold the asset — if they disposed of it before the budget, they will pay the old rates, while any sales made after should have incurred the higher rates.
• Capital gains tax rates and allowances in 2025
But the tax rise was announced after HM Revenue & Customs had finalised its self-assessment filing system for the year ending April 5, 2025, which instead automatically applies the old CGT rates to liabilities calculated in an online tax return.
