Due to HMRC’s software not being updated to reflect the 2024 Autumn Budget’s tax rate increase, nearly 400,000 taxpayers who had capital gains tax (CGT) liabilities in 2023-24 risk receiving significant penalties.
What happened to HMRC’s system?
Last Autumn’s Budget delivered a nasty surprise for investors when Rachel Reeves announced immediate changes to CGT rates. Basic-rate taxpayers now face an 18% charge instead of 10%, while higher earners must pay 24% rather than 20%. But the changes took effect after HMRC had finalised their software.
Anyone who sold assets after this date will find HMRC’s online system underestimates their tax bill. With historical data showing nearly 378,000 people owed CGT in the previous year, the scope for widespread errors is alarming.
Taxpayers in the firing line
Those completing their own returns face the greatest danger, particularly investors who’ve sold shares or other securities. Many remain completely unaware that the old rates no longer apply, of course trusting HMRC’s systems to guide them correctly.
The situation affects roughly half of all tax return filers who rely on HMRC’s built-in tools rather than professional software. This has created what can only be described as a: “perfect storm” – masses of people filing incomplete returns without realising their mistake until it’s too late.
The price of getting it wrong is still high
HMRC will still not treat these errors lightly. Taxpayers face penalties of up to 30% of any shortfall, plus annual interest charges of 8% on unpaid amounts. The tax authority actively investigates returns that don’t add up and can stack additional charges on top of the basic penalties.
HMRC’s solution
HMRC has rushed out a standalone calculator and promises to alert online users about the rate changes. However, this band-aid solution still forces taxpayers to navigate extra complexity while facing potential financial punishment for problems they didn’t create.
Standard deadlines remain unchanged – online returns must be submitted by 31 January, with paper versions due three months earlier.
How we can help
EKW Group specialises in getting these calculations right first time. Whether you’ve already filed or received one of HMRC’s follow-up letters, our team can audit your position and fix any problems before they become expensive mistakes.
Whether you’ve already filed or received one of HMRC’s follow-up letters, our team can audit your position and fix any potential problems. For more information, get in touch today.
