Capital gains tax investigations by HMRC are at an all-time high

In the previous tax year, the taxpayer recovered Pound 266 million in capital gains tax from investigations

How can an inquiry be avoided?

Last year, there were 26% more capital gains tax (CGT) investigations, which brought in 266 million from British underpayers.

According to new Freedom of Information (FOI) data, the taxman closed 9,800 investigations in 2024-2025, up from 7,800 the previous fiscal year. This is the most investigations in a tax year since the Covid pandemic.

The average amount of underpaid tax increased from 23,333 to 27,142 among those whose claims were investigated.

According to FOI data obtained by tax and accounting firm Lubbock Fine, the total amount of tax collected by HMRC after investigations rose from 182 million in 2023-2024 by 46% year over year.

Watch the entire video here. According to wealth manager Quilter's tax and financial planning specialist Rachael Griffin, the data indicated that "investors, landlords, and business owners should not assume capital gains tax reporting slips under the radar."

Griffin continued, "At the same time, through increased data sharing and digital reporting, HMRC has significantly improved its ability to identify discrepancies.

"Information from conveyancers, estate agents, investment platforms, and other financial institutions can be cross-checked against tax returns, making it more difficult for gains to go unreported."

"We are dedicated to helping people pay the correct amount of tax, and the vast majority do," an HMRC representative stated. We employ a number of strategies to guarantee that every taxpayer understands their responsibilities and makes timely payments."

Why are people's capital gains being investigated?

Following the reduction of the annual exempt amount from 6,000 to 3,000 in April 2024, there has been an increase in CGT investigations. In April 2023, it was cut from 12,300 to 6,000.

Griffin stated: "A lot more people, including those who might not have previously had to consider CGT, now have a potential reporting obligation. Because they are not aware of the regulations, some people may be caught off guard as a result."

According to Lubbock Fine, HMRC is also taking harsh measures against cryptocurrency investors, some of whom may not be aware that their assets are subject to taxes.

Director of Lubbock Fine Graham Caddock stated: "Cryptocurrencies were known as the wild west of investing. This classification has stuck with a lot of cryptocurrency investors, and many don't realize how seriously HMRC handles unreported gains.

Even worse, some cryptocurrency investors believe that profits from digital assets are somehow exempt from standard tax laws, which is precisely why HMRC is taking such a strong stance against the industry."

Many young day traders and retail investors, according to Lubbock, were not aware that selling shares could also result in a CGT bill.

How to keep your capital gains investigation from happening.

First, it's important to report any gains accurately.

According to Caddock of Lubbock Fine: "Many CGT inquiries begin because of simple mistakes like not obtaining an independent valuation (possibly multiple ones) for things like gifts of family company shares or even property."

It's important to provide an explanation if you had to enter estimates for asset values when reporting your capital gains.

Caddock clarified, "This may prevent an inquiry entirely, and the disclosure will help limit HMRC's ability to enquire into earlier tax periods."

Many people struggle to report gains on real estate, according to Charlene Young, senior pensions and savings expert at investment platform AJ Bell.

"While gains on your primary residence are typically exempt from CGT, profits on second homes must be declared and the estimated tax paid within 60 days of completion to avoid penalties and further investigation," stated Young.

"HMRC can cross-reference what it has been informed by taxpayers or what it believes hasn't been declared using data from the Land Registry, banks, and estate agents."

Additionally, it's worthwhile to utilize your annual 20,000 ISA allowance to the fullest extent possible. Gains from stocks and shares ISA investments are exempt from CGT.