Capital gains tax (CGT) receipts in the UK fell sharply in 2025, reinforcing concerns that higher taxes on investment gains may be discouraging business activity while failing to deliver additional revenue.
New figures from HM Revenue and Customs show that CGT raised £13.646 billion last year, down 8.4 per cent from £14.900 billion in 2024. The decline follows a pattern seen over several years, with revenue from the tax falling from £16.93 billion in 2022–23 to £14.50 billion in 2023–24, and £13.06 billion in 2024–25.
Wealth managers said the data suggests investors and business owners are increasingly deferring disposals in response to a tougher tax environment. Jason Hollands, managing director at Evelyn Partners, said the figures highlighted the “futility of over-taxing investors.”
“This marked decrease indicates that taxpayers are swerving the crackdown on capital gains by sitting tight and delaying disposals,” Hollands said. “History shows that when CGT is increased, investors either bring decisions forward ahead of changes or are deterred from crystallising gains afterwards — or both. In many cases, more aggressive taxation leads to lower, not higher, revenues.”
The decline in receipts follows reductions to the CGT annual exemption under the previous Conservative government, which cut the allowance from £12,300 in 2022–23 to just £3,000 in 2024–25. Hollands said the data suggested the Treasury had seen little benefit from these cuts, with the main effect appearing to be distortion of investment and business decisions.
Attention is now turning to the impact of CGT rate increases introduced in October 2024 by Chancellor Rachel Reeves. These higher rates came into effect immediately, but much of the impact has yet to appear in official figures, as most capital gains are reported through self-assessment with a reporting lag. Hollands said early indications for January and February 2026 would be closely watched to gauge whether the new rates boost public finances.
Hollands warned that further tax increases, including proposals to align CGT more closely with income tax rates, could be counterproductive. “Taxing investors more heavily on gains from capital they have put at risk does not work as a revenue raiser,” he said. “What it does risk is discouraging entrepreneurialism and investment at a time when the UK needs both to drive growth.”
The latest figures are likely to intensify debate within government over whether capital gains tax can realistically be relied upon as a long-term revenue source or whether repeated hikes simply encourage investors to stay on the sidelines. Analysts said the trend raises wider questions about the effectiveness of taxing investment gains at a time when the government seeks to support business growth and economic activity.
