CGT: HMRC’s software error could cost thousands of taxpayers
Thousands of people who made capital gains in 2024-25 risk hefty penalties due to outdated HMRC software that hasn’t been updated to reflect the Autumn Budget’s tax rate increase.
The problem with HMRC’s system
When Chancellor Rachel Reeves increased capital gains tax (CGT) rates in last year’s Budget, the changes came too late for HMRC’s online filing system. The rates jumped from 10% to 18% for basic-rate taxpayers and 20% to 24% for higher-rate taxpayers on 30 October 2024 – but the software had already been finalised.
This means that anyone who disposed of assets on or after 30 October will get incorrect calculations when completing their CGT section online. With around 378,000 taxpayers having CGT liabilities in 2023-24, the scale of potential errors is significant.
Who’s most at risk?
Self-filers are particularly vulnerable, especially those selling stocks and shares. Tax experts warn that mistakes are inevitable when taxpayers use HMRC’s outdated online system without realising the rate changes have occurred.
Around half of all tax returns use HMRC’s systems rather than third-party software, creating what experts describe as a significant potential error. Many taxpayers will therefore unknowingly fail to include the necessary CGT adjustment figure when filing their returns.
The financial consequences
The penalties for errors are substantial. HMRC can charge up to 30% of the tax due for careless errors, plus 8% interest on late payments. They will question returns that appear incorrect and may impose additional charges alongside late payment interest.
Even taxpayers who’ve calculated correctly face additional hassle. HMRC has begun writing to filers asking them to double-check their returns using the official calculator within 30 days, creating extra work regardless of whether amendments are needed.
HMRC’s response
HMRC has published a calculator to help taxpayers work out necessary adjustments and claims online filers will be prompted to use it. However, this reactive approach still leaves taxpayers dealing with additional complexity and potential penalties through no fault of their own.
The deadline for online submissions remains 31 January, with paper returns due 31 October.
How we can help
Carston ETL can ensure your CGT calculations are accurate from the outset, eliminating the risk of penalties and the hassle of amendments.
If you’ve already filed your return or received a letter from HMRC, we can review your position and handle any necessary corrections on your behalf, giving you peace of mind during this confusing period.
