The Treasury has lost out on more than £1.4billion in capital gains tax (CGT) revenue in the 12 months to March 2025, according to new figures.
HM Revenue and Customs (HMRC) reports a sharp decline, representing a more than 10 per cent drop from the previous year's total of £14.5billion.
This significant reduction in tax income comes at a challenging time for Chancellor Rachel Reeves, who is struggling to balance public finances.
The fall in revenue has been attributed to wealthy individuals leaving the UK to avoid increasing tax burdens on their assets and earnings.
Capital gains tax has plummeted in the wake of the Chancellor's decision-making
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High-profile defectors include top Goldman Sachs banker Richard Gnodde and British property tycoons the Livingstone brothers.
Inquiries about leaving the UK in the first three months of this year were nearly three times higher compared with the same period in 2024, according to Henley and Partners, which provides global relocation services.
Many non-doms and members of Britain's home-grown wealthy elite are choosing to relocate to escape what they perceive as an excessive tax burden on their assets and earnings.
The recent drop in CGT revenue follows changes implemented in Chancellor Reeves's October Budget, which saw the rate rise from 20 per cent to 24 per cent for higher-rate taxpayers at the start of April.
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As a levy, capital gains tax is paid on profits from assets including second homes, stocks and shares.
Additionally, non-domiciled individuals who live in Britain are now having their worldwide earnings subject to UK tax for the first time, following changes implemented by Labour last year.
These tax reforms appear to be driving wealthy individuals to reconsider their residency status.
The revenue shortfall presents a significant challenge for Reeves, who is already grappling with difficult public finances.
The Chancellor faces mounting pressure to improve the UK's economic outlook amid global uncertainty.
A trade war instigated by US President Donald Trump's tariffs has further complicated her efforts to balance the books.
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Reeves has outlined major changes to capital gains tax PA MediaThe £1.4billion drop in CGT revenue represents a substantial blow to Treasury income at a time when stable tax receipts are crucial for government spending plans.
Claire Trott, the divisional director of Retirement and Holistic Planning at St. James's Place, explains that for the 2025/26 tax year, individuals have a CGT allowance of £3,000.
"Beyond this, basic rate taxpayers pay 18 per cent in CGT, with higher and additional rate taxpayers required to pay 24 per cent," she notes.
Trott suggests taxpayers consider a "Bed and ISA" transaction as a potential strategy.
"This means selling your existing shares and rebuying them in an ISA. This is a win-win, allowing you to make use of your ISA allowance while also protecting yourself from CGT over the long term."
