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Capital Gains Tax UK — Rates & Allowances
Tax6 min read•March 2026
Capital Gains Tax in the UK — what it is and how to reduce it legally
Capital Gains Tax (CGT) applies when you sell an asset for more than you paid for it. In the last two years, the annual exemption has been cut from £12,300 to just £3,000 — a change that has brought many more people into scope. If you hold investments outside an ISA, understanding CGT is now more important than it used to be.
⚠️
Not tax advice. This article explains how UK tax rules generally work. Tax is personal — your situation may differ. For your own position, consult HMRC guidance or a qualified tax adviser.
What triggers CGT
CGT applies to the sale (or disposal) of assets including: shares and funds held outside an ISA, second properties and buy-to-let, personal possessions worth over £6,000 (excluding cars), and cryptocurrency. It does not apply to assets held inside an ISA or pension, your main home (usually), cars, and most personal effects under £6,000.
The rates
For 2025/26, CGT rates are: 18% (basic rate taxpayers) and 24% (higher/additional rate taxpayers) — these rates now apply to all chargeable assets including shares, funds, and residential property. The Autumn Budget 2024 raised the main rates on shares and other assets (previously 10%/20%) to match residential property from 30 October 2024. Your CGT band depends on whether the gain, added to your income, falls in the basic or higher rate band.
The annual exemption — use it or lose it
Every individual has a £3,000 annual CGT exemption. Gains below this are tax-free. But unused exemption cannot be carried forward — it resets each 5 April. This means if you have gains to realise, spreading them across tax years (where possible) can double your effective exemption.
Legal ways to reduce CGT
Use your ISA allowance. Assets inside an ISA generate no CGT ever. Moving investments into an ISA (via selling outside and buying inside — sometimes called 'bed and ISA') uses your annual allowance and shields future gains. The helps track what you have left this year.
Use your spouse's or civil partner's allowance. Transfers between spouses and civil partners are exempt from CGT at the point of transfer. This means you can transfer assets to a spouse to use their annual exemption and potentially their lower tax rate before selling.
Offset losses. Capital losses from other assets can be offset against gains. If you have loss-making investments, selling them in the same tax year as a gain can reduce your CGT liability. Losses must be reported to HMRC even if they offset fully.
Timing. If you're close to a tax band boundary or the £3,000 exemption threshold, deferring a sale to the next tax year resets your exemption and may push the gain into a lower rate band.
⚠️
Not tax advice. This article explains how UK CGT rules generally work. Tax is personal — consult HMRC guidance or a qualified tax adviser for your own position.
What triggers CGT and what doesn't
✅ CGT applies to
Shares and funds held outside an ISA or pension. Second properties and buy-to-let. Personal possessions worth over £6,000 (excluding cars). Cryptocurrency. Business assets. Gifts of assets (valued at market price on the date of the gift).
❌ CGT does not apply to
Assets inside an ISA or pension. Your main home (Principal Private Residence relief). Cars. Premium Bonds and NS&I products. Personal effects under £6,000. Transfers between spouses and civil partners (CGT-free at point of transfer).
The rates for 2025/26
Asset type
Basic rate (20%)
Higher / additional rate (40%/45%)
Shares, funds, crypto, other assets
18%
24%
Residential property (not main home)
18%
24%
Business assets (BADR)
10%
14% (rising to 18% by 2026)
Rates on shares and other assets were raised from 10%/20% to 18%/24% in the October 2024 Budget. Your CGT rate depends on whether the gain, added to your other income, falls in the basic or higher rate band.
The annual exemption — use it, don't lose it
Every individual has a £3,000 annual CGT exemption (down from £12,300 in 2022/23). Gains below this threshold are tax-free. Unused exemption cannot be carried forward — it resets on 5 April every year. Spreading gains across tax years is one of the simplest ways to reduce lifetime CGT liability.
Five legal ways to reduce CGT
🏦 Use your ISA allowance (bed-and-ISA)
Sell assets held outside an ISA, crystallise any gain using your annual exemption, then immediately repurchase inside a Stocks & Shares ISA. All future growth and withdrawals within the ISA are permanently tax-free. This is done within a single trading day and uses your £20,000 annual ISA allowance.
💑 Use your spouse's allowance
Transfers between spouses and civil partners are exempt from CGT. If your spouse has unused annual exemption or pays a lower rate of tax, transferring assets before selling can meaningfully reduce the combined tax bill. Get this documented properly.
📉 Offset capital losses
Capital losses from other disposals can be offset against gains in the same tax year or carried forward to future years. If you hold loss-making investments, selling them in the same year as a gain reduces or eliminates the CGT. Losses must be reported to HMRC even if they fully offset — use self-assessment.
📅 Time your disposals
If you are near the basic/higher rate boundary or approaching the £3,000 exemption, deferring a disposal to the next tax year resets your exemption and may push the gain into a lower rate band. A gain made on 6 April gets an extra year of shelter compared to one made on 4 April.
🎁 Gift to charity
Gifts of qualifying assets to UK registered charities are exempt from CGT. The asset is treated as if you sold it at market value, but no CGT arises. You also get income tax relief on the market value under Gift Aid rules. Particularly effective for large, highly appreciated assets.
Reporting CGT to HMRC
You must report and pay CGT if: total gains in the year exceed the £3,000 exemption, OR if total proceeds from all disposals exceed four times the exemption (£12,000 in 2025/26) — even if no tax is due. Report through self-assessment by 31 January following the tax year.
Residential property is different. CGT on UK residential property (other than your main home) must be reported and any tax paid within 60 days of completion. This is a separate requirement from the annual self-assessment and has its own online portal on gov.uk. Missing the 60-day deadline triggers automatic penalties.
💡 BritSavvy note
The ISA Allowance Tracker shows how much of your current year's £20,000 allowance remains — useful for planning how much you can shelter via bed-and-ISA before 5 April. For complex CGT situations (business disposals, property, large share portfolios), a tax adviser will typically save significantly more than their fee.
Frequently asked questions
What is the Capital Gains Tax annual exemption?
In 2025/26, the CGT annual exemption is £3,000 — the first £3,000 of gains are tax-free. Gains above £3,000 are taxed at 18% (basic-rate) or 24% (higher/additional rate) for most assets. Different rates apply to residential property not used as your main home.
How does bed-and-ISA work?
Sell shares held outside an ISA, realising any gain using your annual exemption, then immediately repurchase the same investments inside an ISA. All future gains within the ISA are permanently tax-free. This is done in a single day using the £20,000 annual ISA allowance.
Do I need to report CGT to HMRC?
Yes — if total gains exceed £3,000, or if total proceeds exceed four times the exemption (£12,000), even if no tax is due. Report through self-assessment. Gains on UK residential property (not your main home) must be reported within 60 days of completion — separate from the annual self-assessment.
🔧 ISA as the permanent solution
For long-term investors, the ISA wrapper eliminates CGT permanently on any asset held inside it. A consistent strategy of sheltering new investments inside an ISA each year removes CGT as a consideration for those assets entirely.
See the for how the ISA wrapper works in practice.
Frequently asked questions
What is the Capital Gains Tax annual exemption?
In 2025/26 the CGT annual exemption is £3,000 — the first £3,000 of gains in a tax year are tax-free. Gains above £3,000 are taxed at 18% for basic-rate taxpayers or 24% for higher and additional-rate taxpayers on most assets.
How does bed-and-ISA work to avoid CGT?
Sell shares held outside an ISA realising any gain using your annual exemption then immediately repurchase the same investments inside an ISA. All future gains within the ISA are permanently tax-free. This is done in a single trading day using the £20,000 annual ISA allowance.
Do I need to report CGT to HMRC?
Yes if total gains exceed £3,000 or total proceeds exceed £12,000 even if no tax is due. Report through self-assessment. Gains on UK residential property not your main home must be reported and tax paid within 60 days of completion.