Capital Gains Tax Allowance 2025/26 UK: Rates, Reductions and Smart Strategies

The capital gains tax annual exemption has been cut dramatically over the past few years, from £12,300 in 2022/23 to just £6,000 in 2023/24 and then down to £3,000 from 2024/25 onwards. This reduction means far more people are now paying CGT on investment gains that would have been tax free just a few years ago, and planning around capital gains has become a meaningful part of personal financial management for anyone holding shares, investment property, or other chargeable assets.

Understanding the current rules, which assets attract CGT, what exemptions exist, and what legitimate strategies reduce the bill is important for anyone who holds investments outside of an ISA or pension. Our capital gains tax calculator lets you estimate your CGT liability on any disposal using current 2025/26 rates.

The £3,000 annual exemption for 2025/26

Every UK taxpayer has an annual capital gains tax exemption of £3,000 for 2025/26, meaning gains up to this amount each tax year are free from CGT. This is the annual exempt amount, sometimes called the annual allowance or AEA. Gains above £3,000 in a tax year are added to your income for the year and taxed at CGT rates depending on your total income and the type of asset disposed of.

The exemption cannot be carried forward. If you realise no gains in a tax year or gains below £3,000, the unused allowance is lost. This makes the timing of disposals a meaningful planning consideration. Spreading gains across two tax years to use two exemptions of £3,000 each is a perfectly legitimate approach that many investors use when they have flexibility over when they sell.

Married couples and civil partners each have their own £3,000 exemption. Transfers between spouses are made at no gain, no loss for CGT purposes, meaning you can transfer assets to your spouse to use their exemption and any unused basic rate band. This spousal transfer strategy is one of the most straightforward ways to reduce CGT on investment portfolios held outside of tax-wrapped accounts.

CGT rates in 2025/26 and how they apply

CGT rates depend on the type of asset disposed of and whether the gain falls within your remaining basic rate income tax band. For most chargeable assets including shares, investment funds, and most personal possessions, the rates are 18% for gains within the basic rate band and 24% for gains above it. For residential property that is not your main home, the rates are 18% and 24% respectively from April 2024.

To calculate which rate applies, you add your taxable gains to your taxable income for the year. The portion of the gain that fits within the basic rate band up to £50,270 is taxed at 18%. Any portion above that threshold is taxed at 24%. This means a higher rate taxpayer pays 24% on all gains above the £3,000 exemption. A basic rate taxpayer with a large gain may pay 18% on part of it and 24% on the remainder, depending on how the gain pushes them through the bands.

Assets that attract capital gains tax

CGT applies to disposals of most capital assets including shares, investment funds and ETFs held outside an ISA, investment property, second homes and holiday lets, land, business assets, valuable personal possessions worth over £6,000 each, cryptocurrency, and foreign currency held for investment purposes. Your main home is generally exempt under private residence relief, as discussed below.

Gifts are treated as disposals at market value for CGT purposes, so giving away a valuable asset to anyone other than a spouse is treated as if you sold it at market value on the date of the gift. This catches people out when transferring assets to children or other family members. The recipient acquires the asset at the market value you were deemed to have sold it at, which becomes their base cost for any future disposal.

Cryptocurrency gains are taxable as capital gains, not income, for most individuals. HMRC has made enforcement in this area a priority, and crypto exchanges are now required to provide customer data to HMRC. Each disposal of crypto, including spending it, converting one token to another, or gifting it, is a taxable event that needs to be reported if gains exceed the annual exemption.

Private residence relief: your main home

Your main home is exempt from capital gains tax under private residence relief, provided you have lived in it as your main residence throughout your period of ownership. Periods of absence are treated differently depending on the reason, and the last nine months of ownership always qualify for relief even if you have moved out. This is why many homeowners can sell their main residence with no CGT liability even after significant price appreciation.

Letting relief, which previously gave up to £40,000 additional CGT relief when you had let part of your home, was restricted in April 2020 to situations where you share the property with a tenant. For most landlords who have ever rented their former main residence, this restriction significantly reduced the available relief. Our capital gains tax calculator incorporates these relief calculations for property disposals.

The bed and ISA strategy

One of the most widely used CGT reduction strategies is the bed and ISA approach. This involves selling investments outside an ISA, realising a gain or loss in the tax year, and then repurchasing the same investments inside an ISA using that year's ISA allowance of £20,000. Any future gains and income on the ISA-wrapped investments are then sheltered from tax permanently.

The key rule to be aware of is the 30-day bed and breakfasting rule, which prevents you from selling shares and buying them back within 30 days for the purpose of crystallising a loss. The same rule applies to buying back identical shares within 30 days of a sale, where the repurchased shares are matched against the original shares rather than establishing a new cost base. Moving investments into an ISA is not subject to this rule, which is what makes the bed and ISA strategy effective.

The 60-day reporting rule for property

UK residents who sell residential property and have a CGT liability must report the gain and pay the tax within 60 days of completion. This is done through HMRC's online property reporting service and is separate from and in addition to any self-assessment tax return. Failing to report within 60 days results in automatic late filing penalties and interest on the unpaid tax. The 60-day window is tight and can coincide with other post-completion tasks, so knowing the deadline in advance is important.

Non-UK residents face similar 60-day reporting obligations for disposals of any UK property, whether residential or commercial. This rule predates the 60-day rule for UK residents and has been in place since 2015. If you own UK property while living abroad or are planning to live in Europe after selling a UK property, understanding how both the UK and your European country of residence will treat the gain is essential. Our EU income tax comparison tool gives an overview of how different European countries tax investment income and gains.