Capital gains tax (CGT) revenues fell sharply last year, reinforcing concerns that higher taxes on capital gains are failing to bring in additional revenue while hampering business activity.
New figures released by HM Revenue and Customs show CGT revenue was £13.646 billion in 2025, compared to £14.900 billion in 2024 – a fall of 8.4 per cent.
Asset managers said the decline suggests investors and entrepreneurs are increasingly delaying divestitures in response to a tougher tax environment. Jason Hollands, managing director of Evelyn Partners, said the data highlights the “futility of over-taxing investors”.
“This significant decline suggests that taxpayers are avoiding the capital gains crackdown by waiting and delaying divestitures,” he said. “History shows that when capital gains tax increases, investors either advance their decisions ahead of changes or are deterred from making gains after the fact – or both. In many cases, more aggressive taxation results in lower income, not higher income.”
The figures come from successive cuts to the annual CGT exemption under the previous Conservative government, which reduced the allowance from £12,300 in 2022-23 to just £3,000 in 2024-25. Hollands said revenue data suggests the Treasury benefited little from the move.
Final revenue figures show CGT took in £16.93bn in 2022-23, falling to £14.50bn in 2023-24 and £13.06bn in 2024-25. The latest data suggests that the downward trend is continuing.
“The main consequence appears to have been a distortion and disincentives in investment and business decisions,” Hollands said.
Attention now turns to the impact of the increase in CGT rates announced by Rachel Reeves in her first Budget on October 30, 2024, when higher rates came into effect immediately. Hollands said much of the impact of these changes is not yet visible in the data because most capital gains, aside from real estate gains, are reported with a lag through self-assessment.
“January and February 2026 will be the key months to watch,” he said, adding that early signs do not bode well for hopes that higher capital gains tax rates will significantly strengthen public finances.
Hollands warned that further increases, including proposals to bring capital gains tax more in line with income tax rates, would be counterproductive. “Heavier taxation of capital gains for investors who have risked them does not have a positive impact on earnings,” he said. “The risk is to discourage entrepreneurship and investment at a time when the UK needs both to stimulate growth.”
The latest data is likely to intensify the debate within the government about whether capital gains tax can realistically be used as a long-term source of revenue – or whether repeated hikes are simply enticing investors to stay on the sidelines.
