Realistic photograph of a homeowner reviewing property purchase and sale documents at a desk, with house keys, a calculator and financial paperwork arranged neatly, representing the process of calculating chargeable gains after deducting the original cost and allowable expenses.

Capital Gains Tax Allowance UK: Annual Exempt Amount Explained

The capital gains tax allowance is the amount of profit you can make in a tax year before you have to pay capital gains tax. The capital gains tax allowance in 2026-27 is £3,000, the same as it was in 2025-26. That is far lower than it used to be, so more people now have a tax bill when they sell shares, a second home or other assets.

This guide by The Taxcom explains the annual exempt amount, the current capital gains tax rates and how to work out your taxable gains. It also covers the planning steps that can reduce your tax liability. It is general information rather than personal advice, so check your own circumstances before you act.

What is the Capital Gains Tax Allowance (Annual Exempt Amount)?

Capital gains tax (CGT) is charged on the profit when you dispose of an asset that has gone up in value. It is the gain that is taxed, not the full sale proceeds. You only pay Capital Gains Tax if your overall gains for the tax year, after deducting any losses and applying any reliefs, are above the annual exempt amount. The capital gains tax allowance is therefore a tax-free slice that sits at the start of your overall gains.

The annual exempt amount has been cut sharply in recent years. It has been frozen at £3,000 since 2024/25, following reductions from £12,300 in 2022/23 and £6,000 in 2023/24. A smaller cgt allowance means gains that were once invisible to HMRC now produce a bill.

Not everyone gets the same figure. The same annual exempt amount applies to most UK-resident individuals, executors or personal representatives of a deceased person’s estate, and trustees for disabled people. A lower amount applies to most other trustees. That lower figure is generally £1,500.

Use it or lose it

This annual tax free allowance works on a “use it or lose it” basis. It cannot be carried forward to the next tax year. If you make no gains in a tax year, the allowance simply lapses. Over several years, that unused cgt allowance is lost for good.

Capital Gains Tax Rates for the 2026/27 Tax Year

Capital gains tax rates now depend on your income band rather than the type of asset. From 6 April 2026, the CGT rates are 18% and 24% for individuals, 24% for trustees and personal representatives, and 18% for gains qualifying for Business Asset Disposal Relief or Investors’ Relief. These tax rates apply only to the part of your gain left after the annual exempt amount, so you only pay tax on the excess.

The rules for the current CGT rates and allowances sit on GOV.UK, and our summary of the HMRC tax rule changes from April 2026 puts them in wider context.

Who is taxed

Rate from 6 April 2026

Individuals within the basic income tax band

18%

Individuals above the basic income tax band

24%

Trustees and personal representatives

24%

Gains qualifying for business asset disposal relief

18%

Residential property and other assets such as shares now carry the same tax rates. Gains on residential property were already taxed at 18% and 24%, and since 30 October 2024 other chargeable assets have matched them. A buy to let or second home is therefore taxed at the same capital gains tax rates as a share portfolio.

How Taxable Income and the Basic Rate Band Set Your Rate

To find your rate, you add your taxable gains to your taxable income. Your taxable income is your income minus your Personal Allowance and any other Income Tax reliefs you are entitled to. The standard personal allowance is £12,570.

If the combined amount is within the basic income tax band, you pay 18% on your gains. For any amount above the basic income tax band, you pay 24%. The basic rate band for the 2026 to 2027 tax year is £37,700. Scottish and Welsh taxpayers use this UK basic rate band for capital gains tax purposes too, even though Scottish income tax bands differ.

Basic rate taxpayers can therefore pay both rates on one sale. A gain that pushes you over the basic rate band is split, with the part inside the band taxed at 18% and the rest at 24%. Because your income sets where the gain starts, a higher salary or bonus in the same year can raise your overall tax liability on a sale.

Carried Interest

Carried interest, which is the profit share received by some fund managers, now follows different rules. You’ll pay Income Tax and National Insurance contributions on carried interest you receive from 6 April 2026 instead. If you receive carried interest, take specialist advice, because the other capital gains rules in this guide may not apply.

How to Work Out Your Chargeable Gain?

Six-step horizontal infographic explaining how to calculate UK Capital Gains Tax by identifying the asset's sale value, deducting its original cost and allowable expenses, offsetting capital losses, applying the £3,000 annual exempt amount and calculating tax on the remaining taxable gains at the applicable rate.

The calculation of capital gains tax allowance is the same whatever you sell. Follow these steps for each disposal:

  1. Take the sale proceeds, or the market value if you gave the asset away or sold it for less than it was worth.

  2. Deduct what you paid for the asset, which is its original cost, and any other allowable costs.

  3. The result is your chargeable gain or loss on that asset.

  4. Add up all gains and deduct capital losses to reach your overall gains for the tax year.

  5. Deduct the annual exempt amount from those overall gains. What remains are your total taxable gains.

  6. Add what is left to your taxable income and apply 18% or 24%. The result is your tax liability for the year on those disposals.

Allowable Costs You Can Deduct

Allowable costs reduce your gain, so keep records of them. They typically include:

  • the original purchase price, or original cost, of the asset

  • solicitor, estate agent and valuation fees on buying and selling

  • Stamp Duty Land Tax paid when you bought a property in England or Northern Ireland, or the equivalent Land and Buildings Transaction Tax in Scotland (a connected tax applies in Wales)

  • the cost of capital improvements, such as an extension

Routine repairs and maintenance do not count as allowable costs. Where an asset was bought or sold in a foreign currency, convert the figures into sterling at the exchange rate on each date.

A Worked Example

Suppose you have taxable income of £20,000 and a gain of £52,600 on shares held outside an ISA. After the £3,000 annual exempt amount, your taxable gain is £49,600. Adding this to your taxable income gives £69,600, which is above the basic rate band.

You pay Capital Gains Tax at 18% on £17,700 and then 24% on £31,900. This means you will pay £10,842. Without the allowance, the tax paid would be £720 higher, because £3,000 would also have been taxed at 24%.

Capital Losses and the Annual Exempt Amount

Capital losses can reduce your capital gains tax bill, but the order matters. The annual exempt amount is applied after current-year losses. Brought-forward losses are only used to the extent needed to bring the gain down to the annual exempt amount, so they do not eat into the allowance itself.

That protects your allowance. If you have losses carried forward from earlier years, they are only used up to the amount needed, so you keep your £3,000 for future disposals. Losses must be claimed within four years of the end of the tax year in which they arise. Report them even in a year when you owe nothing, so they are available later.

Using the Gains Tax Allowance with a Civil Partner

Each person has their own capital gains tax allowance, so couples can double the tax-free amount. Assets can be transferred between spouses or civil partners without triggering CGT, which allows both partners to use their £3,000 annual exempt amount. That gives a combined £6,000 of tax-free gains.

The allowance itself cannot be moved from one person to another. If you want to transfer assets to a civil partner before a sale, you need to make a genuine, outright gift. The new owner then pays tax at their own rate, which could be 18% rather than 24% if their income is lower.

The allowance covers all your gains in the same tax year, not each asset separately. If you sell shares for a £2,000 gain and a painting for a £2,000 gain, your total gains are £4,000, of which £1,000 is taxable. More than one disposal in a year therefore shares a single exempt amount.

What Do You Pay Capital Gains Tax On?

CGT applies to chargeable assets. Common examples include personal possessions worth £6,000 or more (excluding cars), property that is not your main home, shares outside an ISA or PEP, and business assets such as land or machinery. Gifting an asset also counts as a disposal. Certain assets, such as machinery used in a business, can have special rules, so check the treatment before you sell.

Your only or main residence is usually protected. You do not usually pay tax when you sell your home. Private residence relief can be reduced if you let the property out, use part of it for business or the grounds are exceptionally large. Other homes, such as a buy to let or holiday cottage, are fully chargeable, and you must pay CGT on any gain above your allowance. Our guide to capital gains tax on property covers the main residence rules in more detail.

Some assets are outside the net altogether. These include ISAs, pensions, UK government gilts, Premium Bonds and betting, pools and lottery winnings. Holding other assets inside these wrappers is a straightforward way to keep gains out of the system.

CGT is also separate from other taxes. A single sale can bring Income Tax on rental profits, Stamp Duty Land Tax on a purchase or Inheritance Tax on an estate, so look at each tax on its own terms.

Business Asset Disposal Relief and Business Assets

Business asset disposal relief (BADR) offers a lower rate when you sell qualifying business assets. From 6 April 2026 you pay 18% if you are a sole trader, partner or trustee and your gains qualify. The relief applies to the first £1 million of qualifying lifetime gains. The rate has risen from 10% and then 14% in recent years.

The conditions are demanding. You must have owned the business or shares for at least two years before disposal, and for shares you need at least a 5% shareholding with voting rights in a trading company. Because the rate is now 18%, the relief only saves tax where the gain would otherwise be taxed at 24%.

The annual exempt amount normally applies before BADR, so it is worth thinking about which gains absorb the allowance. If you are selling business assets, planning the order of disposals and claims can matter as much as the rate.

Gifts and Inherited Assets: Market Value Rules

Professional photograph of a modern residential property with a small sold sign outside and house keys resting on property documents in the foreground, representing UK Capital Gains Tax considerations when selling second homes, buy-to-let properties and other chargeable assets.

When you give an asset away, or sell it to a connected person for less than it is worth, HMRC generally treats the disposal as made at market value. You can have a chargeable gain even though no cash changed hands.

Inherited assets work differently. You do not pay capital gains tax on the person’s death itself. Your starting value for a later sale is normally the market value at the date of death, so only growth after that date is exposed to gains tax. Keep a copy of the probate valuation, as you will need it when you later sell.

When Do You Pay CGT? Reporting and Deadlines

The deadline depends on what you sold. You must report and pay any Capital Gains Tax due on UK residential property within 60 days of completing the sale. You may have to pay interest and a penalty if you do not report and pay on time.

For other assets, such as shares, you normally report through self assessment. Other gains are reported in the tax year after you sold or disposed of the asset, if you use a Self Assessment tax return. This is when you pay tax on those gains, unless you have asked HMRC to collect it through your tax code. You can also use HMRC’s reporting and paying guidance to check which route applies to you, and it is the best place for further information on the process.

If you sell UK residential property and report within 60 days, you still need to show the gain on your self assessment return. That return reconciles the figures and picks up any adjustments.

Non-residents have stricter rules. Non-UK residents must report disposals of UK property or land within 60 days of completion, even if no CGT is due.

Get Expert Tax Advice Before You Sell

The capital gains tax allowance is small, but the planning around it can be worth thousands of pounds. Before you sell a property, shares or business assets, estimate your gain, check your band and consider whether timing or ownership changes would help.

For larger or more complex disposals, specialist tax advisory support can help you plan the sale and file correctly, and our guide on finding a UK tax adviser explains what to look for.

If you would like to talk through a disposal, you can contact our experts at The Taxcom.

Pension Contributions and Other Tax Efficient Ways to Cut Gains Tax

You cannot avoid capital gains tax by ignoring it, but you can legitimately reduce it. Careful planning is the key to a more tax efficient outcome, and it is a good idea to start well before you sell. These are the most common approaches:

  • Use the allowance every year. Selling a holding in stages across tax years uses several annual exempt amounts instead of one.

  • Use both partners’ allowances. Transfers between spouses and civil partners can make full use of two £3,000 allowances.

  • Shelter investments. Stocks and shares ISAs can save significant CGT, and growth inside pensions is also CGT-free.

  • Make pension contributions. Personal pension contributions can extend your basic rate band, which may bring more of a gain within the 18% rate. They are subject to the annual allowance, so check your limit first.

  • Offset capital losses. Realising a loss in the same tax year as a gain can reduce your overall gains.

  • Time your sales. If your income will drop next year, a delayed sale may fall within a lower band.

These are legitimate planning steps, which is different from evasion. Our guide to navigating capital gains tax with smart investment planning looks at how to build them into a longer-term strategy.

Common Mistakes With the Capital Gains Tax Allowance

  • Assuming no report is needed because the gain is under £3,000. Gains below the allowance do not create tax, but some disposals, including certain asset sales, may still need to be reported.

  • Forgetting that residential property gains have a 60-day deadline rather than the self assessment date.

  • Losing allowable costs because receipts were not kept.

  • Claiming a main residence exemption where part of the home was let or used for business.

  • Failing to report capital losses, so they cannot be carried forward later.

  • Overlooking that the allowance cannot be carried forward.

How The Taxcom Can Help

Whether you’re selling an asset or managing your tax position, expert guidance can help you maximise your allowance and minimise your tax bill.

  • Tax Appeals — Challenge HMRC decisions if you disagree with how your Capital Gains Tax has been assessed.

  • Business Growth Advisory — Get financial advice on structuring asset sales and investments tax-efficiently.

  • Rental Income Tax — Landlords can receive specialist support on Capital Gains Tax when selling rental properties.

Frequently Asked Questions (FAQs)

1. What is the Capital Gains Tax allowance for 2026/27?

The UK Capital Gains Tax allowance is £3,000 for most individuals. Tax generally applies when your total taxable gains exceed this amount after allowable losses.

2. Is the £3,000 Capital Gains Tax allowance per asset or per year?

The £3,000 allowance applies to your combined annual gains from property, personal belongings and other investments, rather than separately to each asset.

3. Do I need to declare Capital Gains Tax if my gains are below £3,000?

You may still need to report gains if you file Self Assessment and your total disposal proceeds exceed £50,000. Separate reporting rules apply to non-residents selling UK land.

4. Can I carry forward unused Capital Gains Tax allowance?

No, unused CGT allowance cannot be carried forward to another tax year. However, properly claimed allowable losses can be carried forward to offset future gains.

5. How can I legally reduce my Capital Gains Tax bill?

You can deduct eligible expenses and the original cost of assets, use allowable losses and claim capital gains tax relief where applicable. A tax adviser can recommend suitable options based on your individual circumstances.

Transitional Rules and Earlier Disposals

The rate changes announced at the Autumn Budget 2024 came into effect on 30 October 2024. Transitional rules decided which rates applied around that date. In broad terms, disposals made before it were taxed at the old rates, and the new rates applied to disposals from that date. Special treatment could apply where contracts had been exchanged before the change but completion came after it.

These transitional rules matter if you are filing a late return or amending an earlier year, because the rate depends on the date of disposal. Business Asset Disposal Relief also moved in stages, from 10% to 14% and then to 18%, so check the date of each claim. For further information on how your own timing is treated, check the official guidance or ask an adviser.

Get Expert Capital Gains Tax Advice

Capital Gains Tax planning works best when you understand your options before you sell. The Taxcom’s tax advisors can review your situation and help you use your allowance effectively. Contact us for a free initial consultation.