Taxman triples number of CGT investigations as part of crackdown on TikTok traders and crypto enthusiasts

The tax office has doubled down on its investigations into underpaid capital gains tax, according to new figures.

Investigations into unpaid CGT liabilities rose from 4,564 to 14,223 in the 2023-24 tax year, as HMRC cracked down on amateur traders and crypto investors.

The figures from accountancy group UHY Hacker Young show that a total of £202.4million in under paid tax was recovered from the investigations, an increase from £180.8million in the previous 12 months.

CGT is levied on profits from assets ranging from shares to second homes, buy-to-let properties and personal possessions.

The annual tax-free allowance was £12,300 until April 2023, which meant CGT was typically levied on wealthier taxpayers. 

However, huge cuts – to £6,000 in spring 2023 and £3,000 from April 2024 – have brought more people into the scope of CGT.

The rates for stocks and shares gains were also hiked in the Autumn Budget from 10 to 18 per cent for basic rate taxpayers and from 20 to 24 per cent for those paying higher rates of tax.

Plenty of new investors might be unaware they are liable to pay tax and file their CGT return correctly, which means HMRC are more likely to investigate them.

Brian Carey, tax partner at UHY Hacker Young, said said: ‘With Gen Z embracing non-traditional investments like crypto and meme stocks, HMRC is concerned it is missing out on a lot of unpaid CGT.’

HMRC is also cracking down on investors who are underreporting profits made on their crypto investments.

Last year, the tax office sent thousands of ‘nudge’ letters to individuals it suspects owe tax on their crypto assets after it urged Britons to come forward and disclose any unpaid tax.

Some crypto holders may be unaware they owe CGT on the sale of assets, or even income tax on their holdings if HMRC deems them a crypto ‘trader’.

Traders could subject to paying income tax if they mine cryptocurrency, gain interest from staking their cryptocurrency or regularly trade significant amounts.

Carey added: ‘HMRC’s crackdown on unpaid CGT is a stark reminder that your tax obligations cannot be ignored, no matter the source of your profits.’

Investing inside an Isa or pension can protect you from capital gains tax on profits.

To protect your investments, the key is to ensure that they are inside a stocks and shares Isa wrapper to shield them from CGT, or to potentially hold them within a self invested personal pension. However, you cannot add crypto investments to your Isa.  

An HMRC spokesman told This Is Money: ‘Taxpayers are responsible for ensuring they have declared and paid the correct amount of CGT.

‘We have launched a number of campaigns to raise awareness, including for those selling online, and will continue to take action to educate customers and ensure the right amount of tax is paid.’