EXPERTS have warned of a “stealth tax” that raked in £22.2 billion for the government last year – with the “tripwire” tax-free allowance cut by over 75% in just three years and leading to more people being forced to pay.
Capital Gains Tax (CGT) has quietly become one of the Treasury’s fastest-growing revenue lines with receipts reaching a record £22.2 billion in 2025/26, up from a previous peak of £16.9 billion in 2022/23, and roughly £2 billion more than the £20.3 billion the Office for Budget Responsibility forecast at Budget 2025.
It is a tax on the profit when you sell, or “dispose of”, something, or an “asset”, that has increased in value.
The person caught is rarely wealthy. It is the landlord selling a single former home, the employee cashing in a few years of shares, or the small business owner selling up to retire, many of whom will owe CGT for the first time on gains they would once have kept in full.
Part of the leap is a one-off, experts say. The Office for Budget Responsibility (OBR) attributes the 2025/26 spike to owners bringing forward disposals ahead of feared rate rises, on top of the higher 18% and 24% rates that took effect in October 2024.
But the structural change drawing ever more ordinary people in is the tax-free annual exempt amount, cut from £12,300 to £6,000 and then to £3,000 in the space of three years, more than three-quarters gone.
A modest profit that was once entirely tax-free now triggers a bill and a filing obligation.
Stealth tax
Harvey Dhillon, Founder & CEO at Zmartly, said the shrinking £3,000 allowance is a “tripwire” that pulls more and more people into the tax net.
He added: “The record £22.2 billion take was partly a rush to sell before feared rises. The quieter, lasting shift is an allowance most people never think about. The main rates, 18% and 24%, last rose in 2024. What changed underneath is the tax-free annual exempt amount, cut from £12,300 to £3,000 in three years, more than three-quarters gone.
“A £3,000 allowance is not tax relief, it is a tripwire. The person who trips it is rarely the seasoned investor.
“So if you are planning to sell, do not leave it to chance: use each spouse’s allowance, time disposals across tax years where you can, and keep the records that prove what the asset cost you. The headline was a record £22.2 billion. The real story is a £3,000 line that now catches people it was never aimed at.”
Alex Reilly-Walling, Financial Adviser at Meriden Financial Planning, said planning ahead matters.
He added: “I’d call this a stealth tax, without a doubt. The people being caught aren’t the wealthy with sophisticated tax planning strategies. It’s business owners selling up for retirement, employees cashing in company shares, and landlords leaving the rental market. Landlords are a good example.
“Years of tax changes, increasing regulation and rising costs have made buy-to-let far less attractive for many smaller landlords. They’re selling properties they’ve held for years, only to find a sizeable CGT bill on the way out. Many people focus on the sale price without appreciating how much they’ll actually keep after tax.
“That’s why planning ahead matters. Whether you’re selling a business, property or investments, reviewing ownership structures, available reliefs and the timing of a sale can make a significant difference. CGT is no longer a tax paid by the wealthy. It’s increasingly affecting ordinary people at major financial milestones.”
A record haul
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said the £3,000 exemption is now almost incidental.
He added: “The record CGT take reflects more than people accelerating sales ahead of tax changes, it’s in a large part the result of a shrinking annual allowance quietly pulling far more people into the tax net. For business owners and higher earners, the £3,000 exemption is now almost incidental, making proactive planning far more important.
“I’ve seen business owners delay or restructure exits, use spousal transfers, maximise pension funding or spread disposals over time to manage liabilities. The wealthiest will usually have access to advice and planning opportunities, meaning it’s often the one-off seller or entrepreneur retiring after decades of building a business who faces the biggest surprise.
“A key piece of advice is don’t agree a sale before understanding the tax consequences, as planning opportunities can disappear once contracts are exchanged.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said the allowance going down means more people are being pulled into the net of the tax.
She added: “A record CGT haul is not proof the tax is fair. It is proof people changed behaviour when they feared the rules would change again. The annual allowance has fallen from £12,300 to £3,000. That is not a tweak. It pulls ordinary one-off decisions into the tax net: selling shares to help a child, selling a former home, or a business owner finally stepping back after years of building something.
“The very wealthy can plan. They have advisers, structures and time. The person caught off guard is the one who assumes a modest gain is too small to matter, then finds a tax bill and reporting obligation attached. Nobody should rush a sale because of headlines.
“But anyone considering a disposal should get organised: know the purchase cost, keep records, check available losses, consider timing across tax years and take advice before contracts are exchanged. The issue is not paying a fair share. It is a system increasingly treating ordinary asset ownership as a soft target.”
Photo by Chirayu Trivedi on Unsplash.
