HMRC has recently been issuing Capital Gains Tax nudge letters to certain taxpayers in connection with gains reported on their 2024/25 Self-Assessment returns. The letters form part of a targeted compliance campaign following changes to Capital Gains Tax rates announced in the October 2024 Autumn Budget.
If you have received one of these letters, it is important to understand what it means, how the rate changes may affect your return, and what action, if any, is required.
If you would like your Capital Gains Tax position reviewed before responding to HMRC, our tax advisory team is available to help. Speak to a tax expert today.
Why Is HMRC Reviewing Capital Gains Tax Returns for 2024/25?
The 2024/25 tax year was unusual because Capital Gains Tax rates changed part-way through the year. Following the Government’s Autumn Budget on 30 October 2024, the main rates of Capital Gains Tax increased with effect from that date.
This means that gains realised before and after 30 October 2024 may be subject to different rates of tax within the same tax year.
For disposals made between 6 April 2024 and 29 October 2024, the main CGT rates for most assets were 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. For disposals made on or after 30 October 2024, these rates increased to 18% and 24% respectively. The rates for residential property disposals remained unchanged at 18% and 24%.
This mid-year change has added a layer of complexity to Self-Assessment returns for 2024/25. HMRC’s campaign appears to focus on checking that gains have been correctly allocated and that the appropriate rates have been applied based on the date of disposal.
What Does an HMRC Capital Gains Tax Nudge Letter Say?
The correspondence does not necessarily indicate that HMRC believes a return is incorrect.
The letters are designed to encourage taxpayers to review their Capital Gains Tax calculations and confirm that the correct rates have been applied. In many cases, these letters form part of HMRC’s wider compliance strategy and are intended to prompt taxpayers to revisit areas where errors are more likely to occur following legislative changes.
Should You Be Concerned About Receiving a Nudge Letter?
Receiving an HMRC Capital Gains Tax nudge letter should not automatically be a cause for concern.
Where a Self-Assessment return has been prepared carefully and the Capital Gains Tax calculations reflect the correct rates for the relevant disposal dates, there may be no further action required other than confirming the position to HMRC if requested.
However, taxpayers who prepared their own returns, or who are uncertain about how the mid-year rate changes were reflected in their calculations, would be well advised to seek professional advice before taking any action.
If you are concerned about the Capital Gains Tax position on your 2024/25 return, contact our team and we will be happy to review your position.
What Should You Do If You Receive a Letter?
If you receive correspondence from HMRC regarding Capital Gains Tax rates applied on your 2024/25 Self-Assessment return, the steps to take are as follows:
- Read the letter carefully and note any deadlines provided.
- Review the Capital Gains Tax computations submitted with your return.
- Check that gains have been taxed at the correct rates based on the date of disposal and the legislation in force at the time.
- Seek professional advice if you are uncertain about the calculations or the appropriate response to HMRC.
Our View on HMRC’s CGT Campaign
We expect more taxpayers to receive Capital Gains Tax nudge letters as HMRC continues its review of 2024/25 Self-Assessment returns.
The key point is that receipt of a nudge letter does not automatically mean that an error has been identified. In many cases, it is simply an invitation to review the return and ensure that the Capital Gains Tax position has been reported correctly.
Responding promptly and accurately, with professional support where needed, is the best approach.
If you have received a letter from HMRC regarding Capital Gains Tax rates on your 2024/25 return and would like assistance reviewing your position, please contact us. Our team of experts are happy to help.
What is an HMRC Capital Gains Tax nudge letter?
An HMRC Capital Gains Tax nudge letter is a piece of compliance correspondence sent to taxpayers whose 2024/25 Self-Assessment returns may warrant review following the mid-year changes to CGT rates introduced in the October 2024 Autumn Budget. Receiving a nudge letter does not mean HMRC has identified an error. It is an invitation to review your return and confirm that the correct rates have been applied.
Why did Capital Gains Tax rates change during 2024/25
Capital Gains Tax rates changed part-way through the 2024/25 tax year following the Government’s Autumn Budget on 30 October 2024. Gains realised before and after that date may be subject to different rates, which has added complexity to Self-Assessment returns for that year.
Do I need to respond to an HMRC nudge letter?
You should read any HMRC correspondence carefully and note any deadlines specified. If you are confident that your return is correct, you may simply need to confirm your position to HMRC if asked. If you are uncertain, it is advisable to seek professional advice before responding.
What if I am not sure whether the correct CGT rates were applied?
If you are uncertain whether the correct Capital Gains Tax rates have been applied on your 2024/25 return, you should seek advice from a qualified tax adviser before taking any action. Edwards Accountants can review your position and advise on whether any correction or further communication with HMRC is needed.
Can Edwards Accountants help me respond to an HMRC nudge letter?
Yes. If you have received a Capital Gains Tax nudge letter and would like support reviewing your return or communicating with HMRC, our tax advisory team can assist. Contact us to discuss your circumstances.