The hike in capital gains tax (CGT) at Labour’s first Budget in 30 October 2024, effective immediately, walked into the familiar problem of HMRC not updating software mid-year to reflect rate changes.

This means that a special calculation of CGT liability across the split year needs to be calculated manually and then entered in box 51 of the CGT summary pages on the self assessment tax return.

Taxpayers who have sold assets including shares, second homes and crypto, and so forth, after 30 October 2024 will have to calculate how much tax needs to be paid when completing their self assessment tax returns, rather than the usual automatic calculation performed by the HMRC software.

HMRC warned: ‘People who have sold assets after 30 October 2024 need to be aware of changed rates of capital gains tax for the disposal of assets when completing their self assessment tax return as it won’t automatically calculate the correct amount of capital gains tax due.

‘Instead, they may need to work out an adjustment to the tax automatically calculated using the adjustment calculator on gov.uk.’

Essentially anyone who has sold assets in the six-month period from 30 October 2024 to 5 April 2025 should check very carefully to make sure they do not end up with an HMRC penalty or worse.

The main rates of capital gains tax (CGT) increased to 18% for basic rate taxpayers and 24% for those paying higher rates on 30 October 2024. The chancellor’s decision to impose the tax rise immediately on the day of the Budget was to stop potential tax planning to avoid the higher rate. But then HMRC did not update its software to take account of the mid-year rate change creating the problem for self assessment taxpayers.

Commercial software providers are likely to have taken the change into account and updated their filing software accordingly, although this is not a given so needs to be checked before preparing a tax return.

But HMRC clearly has not made the update which could have allowed for automatic calculations. Taxpayers are advised to be very careful when preparing their tax returns.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘Beware of capital gains tax mistakes. Annoyingly, you need to use the adjustment calculator on the gov.uk HMRC website to make changes to the calculation.’

Many taxpayers could be tripped up by the change, particularly those who do not use an accountant, so this is a major concern.

Charlene Young, senior pensions and savings expert at AJ Bell, said: ‘The mid-year change means some people risk underreporting and underpaying any tax they owe for 2024/25, particularly if they rely on HMRC’s systems – perhaps because they complete them without the help of commercial software or an accountant.

‘HMRC’s tax software can’t cope with different tax rates across a tax year and applies the (lower) rates in force before 30 October to all chargeable gains on investments like shares or investment funds.

‘Although savings and investment providers would have sent an annual summary to help you work out whether your total gains are over your annual tax-free allowance, you’ll need to take extra care if any of these gains were made on or after 30 October 2024.

‘HMRC has developed an online calculator to help taxpayers report correctly. It will work out an adjustment to include on the return so that the correct amount of tax is declared and paid.

‘This figure should be inputted into box 51 of the CGT summary pages of your return, and you should also save the online results page and submit it as an attachment at the same time. 

‘If you use commercial software to calculate and submit your tax return, this might have been updated to use the correct rates, but you should still double check with your accountant and the software provider.’

Useful links

HMRC CGT adjustment calculator

Budget 2024: immediate hike in CGT rates | 30 Oct 2024