The Capital Gains Tax allowance, also called the Annual Exempt Amount, is the amount of profit you can make from selling or disposing of assets without paying Capital Gains Tax. For the 2025 to 26 tax year, the allowance is only £3,000. This guide explains the current rules, how to calculate gains, reliefs that may apply, and how reporting capital gains works for the 2025 to 26 tax year.
- The Annual Exempt Amount applies to total yearly gains; one £3,000 allowance covers all disposals across assets, including shares and property.
- CGT applies to profits on disposals, not sale proceeds; deduct allowable costs, offset losses, then apply the allowance to find taxable gains.
- Typical chargeable assets include non‑main residence property, shares outside ISAs, business assets, valuable chattels, and cryptoassets.
- CGT rates: 18% for basic rate, 24% for higher/additional rate; Business Asset Disposal Relief gives 14% up to £1m on qualifying gains.
- Key rules: gifting counts as disposal; report UK residential property gains within 60 days; large proceeds over £50,000 may require reporting even with no tax.
- Reduce CGT by spousal transfers, using carried‑forward losses, claiming BADR, timing disposals, and fully using the £3,000 allowance.
What is the Capital Gains Tax Allowance?
The Capital Gains Tax (CGT) allowance means that you only pay Capital Gains Tax on the amount of gain above the set threshold when assets or shares are sold. CGT applies to the profit, not the full sale price. For 2025 to 26, the allowance is £3,000 for individuals and personal representatives. Trustees have a lower allowance of £1,500. This continues a downward trend from £12,300 in 2022/23 and £6,000 in 2023 to 24. The reduced allowance brings many more shareholders and business owners into the Capital Gains Tax system.
The Annual Exempt Amount applies to your total gains across the whole tax year. If you sell multiple assets, including limited company shares and property, the same £3,000 allowance applies to the combined amount. Shareholders can use the allowance when selling or gifting shares. Understanding the latest CGT changes and available reliefs is critical if you’re considering selling shares, property, cryptocurrency, or other significant assets.
What Do You Pay Capital Gains Tax On?
You may have to pay CGT when you dispose of:
- Property that is not your main home, such as a buy-to-let, second home, or commercial premises.
- Your main home, in limited circumstances, for example, if part of it has been let out, used exclusively for business, or it is unusually large.
- Any shares that are not held in an ISA or similar tax‑sheltered account, including shares in listed companies and shares in a private limited company.
- Business assets, such as land, buildings, goodwill, or equipment used in a trade. This is particularly relevant when you sell or wind up a business, or dispose of shares in your own trading company.
- Personal possessions (chattels) worth £6,000 or more, such as art, antiques, jewellery or collectables, but not your car.
- Cryptoassets, such as cryptocurrency or tokens. These are treated as chargeable assets rather than currency, so gains on disposal can be taxable.
What Are the Capital Gains Tax Rates?
Basic rate taxpayers pay 18% on gains from shares and business assets. Higher rate and additional rate taxpayers pay 24% on the same types of gains. These rates apply to most assets, including limited company shares.
| Tax Status | Standard Rate (Shares and Business Assets) | Residential Property Rate |
|---|---|---|
|
Basic rate payer |
18% |
18% |
|
Higher or additional rate payer |
24% |
24% |
|
Business Asset Disposal Relief |
14% (up to £1m limit) |
Not applicable |
How Do I Calculate the Taxable Gain?
Check the sale date
The date of disposal decides which tax year applies. Selling on 5th April 2025 falls into the 2024 to 25 rules. Selling on 6th April 2025 falls into the 2025 to 26 rules.
Calculate the gross gain
Use the formula: disposal proceeds minus original purchase cost. If the asset was gifted, use the market value at the date of the gift.
Deduct allowable costs
You can deduct certain costs when working out your gain on the sale of shares or assets, including:
- Solicitor fees
- Stamp Duty when acquiring shares
- Broker fees for buying or selling shares
- Improvement costs for property
- Professional valuation fees
Apply available reliefs and allowances
You can offset losses from the current or previous tax years before applying the Annual Exempt Amount. After deducting losses, subtract the £3,000 allowance. The remaining amount is your taxable gain.
Selling limited company shares is one of the most common triggers for Capital Gains Tax for business owners. Share disposals may occur during a business sale, restructuring, or transfer of ownership. It is important to consider that limited companies pay Corporation Tax on their own gains, while shareholders pay Capital Gains Tax on their personal gains from selling shares. Understanding this difference is key when planning a business exit.
Business Asset Disposal Relief (BADR) is a key relief for shareholders selling their companies. For 2025 to 26, the rate is 14% on the first £1 million of qualifying gains. To qualify for BADR, you must be an employee or officer, hold at least 5% of the shares, and meet a two-year ownership requirement.
Many people are surprised to learn that gifting is treated as a disposal for Capital Gains Tax. If you give shares to a child, friend, or connected person, HMRC treats it as if you sold the shares at market value.
Managing Losses and Reporting to HMRC
Capital losses can occur when you sell an asset for less than its original cost. To use the loss against future gains, you must report it to HMRC within four years of the end of the tax year in which it arose. Recording losses protects your future tax planning options.
Reporting deadlines depend on the type of asset. UK residential property disposals must be reported and paid within 60 days. Gains on shares or business assets are usually reported through Self Assessment. The payment deadline is 31stJanuary following the end of the tax year.
Reporting capital gains may also be required when there is no tax to pay. If your total disposal proceeds exceed £50,000, you must report the gains even if they are covered by the allowance.
A trusted accountant can help you report losses on time and handle your Self Assessment.
How Can I Reduce Capital Gains Tax?
There are several ways to reduce your Capital Gains Tax bill, including:
1. Maximise your household allowance through spousal transfers
Transfers between spouses and civil partners incur no CGT, allowing you to effectively double your combined annual allowance. This is a particularly powerful strategy if one partner occupies a lower income tax bracket, ensuring gains fall within the basic rate band.
2. Use capital losses from previous years
Capital losses, whether from the current tax year or carried forward from previous periods, can substantially reduce your taxable gains. Ensure losses are formally reported to HMRC within four years of the tax year in which they arose to preserve your right to use them against future gains.
3. Claim Business Asset Disposal Relief on qualifying sales
If you are selling shares in your own trading company or disposing of a business interest, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can massively reduce your tax bill. The relief applies a preferential 14% rate (rising to 18% from April 2026) on qualifying gains up to a £1 million lifetime limit; far lower than the standard 18% or 24% rates, provided you meet the ownership and employment requirements.
4. Carefully time asset disposals
Consider the timing of sales carefully, especially if your income is expected to fluctuate across tax years. Deferring a disposal to the 2025/26 tax year, or accelerating one into the current year, can shift gains into a lower tax bracket and maximise use of your allowance before rates or thresholds change.
5. Use your full annual exempt amount
The £3,000 allowance cannot be carried forward; it expires at the end of each tax year. If your total gains fall below this threshold, you owe no CGT. Plan smaller disposals strategically throughout the year to ensure you are not leaving this valuable exemption unused. In other words, ‘use it or lose it’.
Capital Gains Tax Examples
Example 1: Limited Company Share Disposal (as a basic rate taxpayer)
Scenario: You sell shares in your private limited company on 15th May 2025. Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £35,000, and your taxable gains from the share sale are £18,500.
Calculation: First, deduct the Capital Gains Tax-free allowance from your taxable gain. For the 2025 to 2026 tax year, the allowance is £3,000, which leaves £15,500 to pay tax on.
Add this to your taxable income. Because the combined amount of £50,500 is more than £37,700 (the basic rate band for the 2025 to 2026 tax year), you will pay Capital Gains Tax at 18% on £2,700 and then 24% on £12,800.
This means you will pay £3,534 in Capital Gains Tax.
Example 2: Property Disposal with Capital Losses (as a higher rate taxpayer)
Scenario: You sell a residential property on 10th August 2025 and realise a gain of £65,000. However, you also made a capital loss of £8,000 from selling shares earlier in the year. Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £55,000.
Calculation: First, offset your capital loss against your gain: £65,000 – £8,000 = £57,000.
Next, deduct the Capital Gains Tax-free allowance from your remaining gain. For the 2025 to 2026 tax year, the allowance is £3,000, which leaves £54,000 to pay tax on.
Add this to your taxable income. Because the combined amount of £109,000 is more than £37,700 (the basic rate band for the 2025 to 2026 tax year), you will pay Capital Gains Tax at 24% on all £54,000 (as your total income already exceeds the basic rate threshold).
This means you will pay £12,960 in Capital Gains Tax.
Final Words
The reduced Capital Gains Tax allowance means more people now face CGT when selling or gifting assets. Understanding the rules and available reliefs helps you plan ahead and avoid unnecessary tax.
