Almost 400,000 Britons paid CGT in the 2021/22 tax year, twice as many as 10 years ago, with the total bill hitting £16.7billion. AJ Bell head of investment analysis Laith Khalaf warned the numbers are set to "explode" again as Chancellor Jeremy Hunt cuts the annual exempt amount.

This is the amount of capital gains any individual can make each financial year before they trigger a tax bill.

It was slashed from £12,300 a year to just £6,000 from April 6 this year and will fall again to just £3,000 from April 6, 2024.

We now pay more than twice as much CGT as inheritance tax, where the annual bill has just topped £7billion.

CGT is charged on profits when selling assets such as a second home or investment property, a business, antiques, jewellery, cryptocurrency or shares and investment funds held outside the tax-free Isa wrapper.

Basic rate taxpayers pay CGT at 10 percent which rises to 18 percent on property sales, while higher rate taxpayers pay CGT at 20 percent or 28 percent when selling property. There is nothing to pay when selling your main home.

Things could get even worse if labour takes power amid suggestions that it could align CGT tax bands with income tax, making them even more punitive.

CGT is seen as a rich person’s tax but the net is being cast a lot wider than that these days, Khalaf said. “Investors with a relatively small amount of shares or investment funds held outside of an Isa may now find themselves caught in a CGT trap." 

They may still escape HMRC's clutches by planning carefully and only taking a small amount of gains each year, to keep inside the annual exempt amount. 

Now could be a particularly good year to do that before it is cut to £3,000 from April 6 2024.

Khalaf said many investors sell their shares then buy them back again inside a tax-free Isa, a process known as Bed & Isa. 

Married couples and civil partners can transfer assets between each other free of CGT, allowing them to use both their exemptions. Investors can also offset any investment losses in their portfolio against gains.

Business owners now pay more CGT as the lifetime limit for Business Asset Disposal Relief has been slashed from £10million to £1million.

HMRC’s bumper CGT take has been further boosted by the growing number of landlords selling up, said Rachael Griffin, tax and financial planning expert at Quilter. “There is an exodus of landlords as tighter tax laws make buy-to-let a less attractive investment”.

In the 2022/23 tax year, 139,000 people reported 151,000 property sales with a total tax liability of £1.8billion. That’s an average bill of £11,920 per home.

The landlord exodus may accelerate as higher borrowing costs eat into their property margins, while many want to get out ahead of a potential house price crash.

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Landlords benefit from the annual exempt amount and can also offset their initial purchase costs against the final bill. Estate agent and solicitor fees, stamp duty when the property was purchased, and surveying and valuation costs can all be deducted.

They can also claim for any costs linked to improvement work, such as a garage, conservatory or extension, or upgrading kitchens and bathrooms. In all cases, they must keep receipts.

Like-for-like replacements of existing fixtures and fittings do not qualify, nor does upkeep such as repairing a broken window or roof tiles.

Under Private Residence Relief (PRR) rules, landlords can also claim CGT relief for any years that the property was their main residence.

Others choose invest in buy-to-let via a limited company as this means they pay corporation tax on profits instead of CGT, which starts at a lower rate 19 percent on profits up to £50,000.

While the rich still pay most CGT, with less than one percent contributing 45 percent of all receipts, many taxpayers who would never consider themselves particularly wealthy are now in the firing line, too. 

So make sure you don’t forget about CGT. HMRC certainly won’t.