Mid-year rate rises have led to tax return errors due to Capital Gains Tax changes. Understand who is affected, what HMRC letters mean, and how to correct returns. Use HMRC's tool and amend your returns promptly to avoid interest ...
Tax return errors, Due to CGT changes, Mistakes lead to interest
Tax return errors due to Capital Gains Tax (CGT) changes have surged after mid-year rate rises, particularly where disposals occurred on or after the 30th of October 2024 and accounting software did not apply the correct rates.
What changed and when?
From the 30th of October 2024, the main CGT rates for assets other than residential property and carried interest rose from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. Disposals before that date keep the earlier rates; disposals on or after that date use the higher rates.
These mid-year shifts often cause tax return errors due to CGT changes when multiple disposals span both periods.Some self-assessment calculations still apply the pre-30th of October rates to later disposals unless a manual adjustment is made.
HMRC has released an online calculator to determine the extra CGT due, but omission or mis-entry of the adjustment is creating tax return errors due to these Capital Gains Tax changes.
So what do the HMRC letters mean?
HMRC is contacting taxpayers who reported affected disposals and appear to have under or over-calculated their CGT liability. One letter flags an incorrect adjustment; another flags no adjustment where one seems needed.
Recipients are asked to respond within 30 days by either amending the return or confirming it is correct; otherwise, interest (and potentially further action) may follow. This campaign is explicitly targeting tax return errors due to CGT changes.
Practical steps to fix issues:
Identify all disposals on or after the 30th of October 2024 that are not residential property or carried interest.
Re-run the figures with HMRC's calculator to isolate the uplift created by the 18% and 24% rates.
Check interaction with income bands, losses, and the annual exempt amount to avoid compounding tax return errors due to CGT changes.
Enter the adjustment on the capital gains pages and amend the return within the 30-day window if required.
Pay any extra CGT promptly to minimise interest; keep evidence of working papers and calculator outputs.
If the original return is correct, contact HMRC using the details in their letter to prevent unnecessary follow-up.
Also watch out for ...
Mixed-year disposals: gains before and after the 30th of October must be calculated using the correct rate for each disposal date.
Rate scope: the increases do not apply to residential property (which has its own 18% and 24% structure) or to carried interest.
Band management: confirm the remaining basic rate band after deducting income and earlier gains, and apply 18% and/or 24% accordingly.
Loss strategy: ensure losses are optimally set against higher-rate gains where possible.
Record-keeping: retain contract notes, completion statements, and computation schedules tying through to the adjustment figure.
By acting early and using HMRC's tools if needed, verifying bands and losses, and amending your returns swiftly, taxpayers can resolve tax return errors due to CGT changes and avoid mounting interest and potential fines.
If anything I've written in my blog post resonates with you and you'd like to discover more of my thoughts about mid-year CGT rate changes causing tax return errors, or maybe you're unsure your latest returns are correct, then do call me on 01908 774320 and let's see how I can help you.
Don't forget to stay updated with our daily social media posts on Facebook.
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
Mandatory direct debit for VAT and PAYE could soon become the norm for most businesses. The plan aims to improve collections and reduce errors, but it may create headaches for some businesses, especially those using other pay...
The summer holidays are a popular time for young people to gain their first work experience, and many businesses welcome the extra help during their busiest months ......
Artificial intelligence is no longer something businesses are simply experimenting with, and it is rapidly becoming part of everyday life, especially in recruitment. The latest AI hiring trends suggest that this shift will on...
At Essendon, we believe that good accounting is about more than numbers. It's about giving business owners confidence that everything is organised, properly handled, and under control ......
Millions of taxpayers could pay their tax earlier under HMRC's proposed self-assessment changes. The move may smooth tax deadlines, but it could also tighten cash flow. For many, the real issue will be how quickly the system ...
This pressure is feeding straight into weaker cash flow and tighter margins for everyone. Businesses are finding it harder to plan, price and grow when expenses keep climbing faster than demand. It is a messy combination, and...
I read with interest an announcement by HMRC about a series of measures designed to simplify the tax system, reduce administrative burdens and make it easier for businesses to meet their tax obligations. While many of the pro...
Burnham's Britain sounds bold, but the maths still has to work. If taxes rise, borrowing climbs, or spending is squeezed, somebody pays. The tricky part is making the politics add up without breaking the economy ......
Sometimes the best recommendations come from those we trust most. A friend mentions an app that has made life easier. A colleague shares a genuinely u ...
Once again this week, I was drawn into a debate about whether to appeal to a wide range of clients or focus on a tight target market. It's a fundament ...
Unlock your potential with blogging for business coaches, an invaluable tool for sharing expertise while connecting with your audience. Embrace the un ...
Renovating your home can be loud, messy, and surprisingly draining. You can sidestep the chaos by staying somewhere local that feels settled, private, ...
All content on this blog, including but not limited to text, images, videos and audio, is protected by copyright. No part of this blog may be reproduced, copied, distributed, or otherwise used without the prior written consent of the author. Unauthorised use constitutes a breach of intellectual property rights.
Please note that many elements of this blog have been created using Artificial Intelligence (AI). As such, content may not always reflect verified facts or professional advice. The information provided is for general interest only and should not be relied upon as a sole source for making decisions, financial or otherwise. Readers are strongly advised to seek independent advice from qualified professionals appropriate to their country and situation.
The author of this blog, YourPCM Limited, and its directors, employees, and authorised agents accept no liability for any loss, harm, or consequence arising from the use or interpretation of content found on this site.
The sblogit.com platform is provided on an “as is” basis. By continuing to view or interact with this blog, you acknowledge and accept these terms. If you do not agree with any part of this notice, please cease using this site immediately.
YourPCM Limited is a company registered in the UK and operates exclusively under the jurisdiction of the laws of England and Wales.
