How to Avoid (or Minimise) Capital Gains Tax in the UK

In the UK, when you sell or dispose of an asset and make a profit (a “gain”), you may owe tax to HM Revenue & Customs (HMRC). This tax is known as Capital Gains Tax (CGT).

For hustlers, side‑business owners and serial entrepreneurs, the good news is: you don’t always have to pay CGT in full, there are legal reliefs, allowances, and planning strategies that can reduce your bill. Below we walk you through how CGT works, where the tax traps lie, and most importantly, how to minimise your CGT liability while staying fully compliant.

What is Capital Gains Tax (CGT) and when does it apply?

CGT is a tax on the profit made when you dispose of (“sell”, gift, exchange) an asset that has increased in value.
The key things to know:

• The tax is on the gain (sale price minus purchase price minus allowable costs), not on the entire sale price.
• Disposals include selling an asset, giving it away as a gift, transferring it, swapping it for something else, or receiving compensation if it’s destroyed.
• If you’re UK resident you are typically liable to CGT on worldwide assets.
• If you’re non‑resident, you may still owe CGT on UK residential property (and possibly other UK assets) but the rules differ.

Current rates, allowances, and what you need to watch

As of the tax year 2024‑25 and for future planning, some key rates and facts:

• The annual CGT exempt amount (Annual Exempt Amount) for individuals means that gains up to that amount may not give rise to CGT.
• CGT rates for residential property for individuals are 18% for basic‑rate taxpayers and 24% for higher/additional rate taxpayers.
• For other assets (shares, business assets, non‑residential property) relatively similar bands apply – rates 18% and 24% (for disposals after 30 October 2024).
• You must report and pay CGT for UK residential property within strict deadlines (e.g., 60 days of completion) if CGT is due.

Because of these rates and rules, proactive planning matters. If you simply make a disposal without considering your CGT position you may pay more tax than necessary.

Why you need to plan & common areas where hustlers lose out

If you’re running side hustles, multiple investments, property deals or business disposals, you’re likely to face CGT issues. Some mistakes to avoid:

• Failing to keep accurate records of purchase costs, enhancement costs, sale costs (these reduce your gain).
• Ignoring reliefs such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), Hold‑over Relief, Rollover Relief. These can reduce or defer CGT.
• Selling an asset without checking your income tax band, because CGT rate can depend on your total taxable income + gains.
• Selling UK residential property and missing the 60‑day filing deadline – resulting in penalties.
• Thinking “I’m non‑resident so I’m free of CGT” without checking the details: for example UK residential property by non‑residents still involves CGT.

How to legally minimise your CGT liability

Here are actionable strategies you can apply. Some may need you to start planning now, especially if you anticipate a future disposal.

1. Use your annual exempt amount

Every individual has a tax‑free CGT allowance (the “annual exempt amount”). Gains up to that amount in a tax year may be free of CGT.

By planning your disposals so that in each tax year you keep gains under that threshold you can minimise tax. For example, if you have several small investments to sell, spread them over two tax years rather than doing all in one year.

2. Offset allowable costs and losses

When you calculate the gain, remember to deduct:

• The original cost of acquisition.
• Costs of improving the asset (capital enhancements) – e.g., renovations to a property.
• Costs of disposal (legal fees, agent fees, etc.).
• Any allowable losses brought forward from previous years.

Having solid documentation is critical, keep invoices, receipts, and valuations.

3. Time the disposal with your income tax band in mind

Since CGT rate depends on whether you are a basic rate or higher/additional rate taxpayer, and your total taxable income + gain may push you into the higher band:

• If you expect your income to drop in a future tax year, consider delaying disposal until then.
• Conversely, if you expect income to rise (bonus, salary increase), consider disposing earlier.

This strategy requires forecasting your income/tax position.

4. Transfer assets between spouses or civil partners

Spouses and civil partners can transfer assets between them without incurring CGT. This can allow utilisation of both individual CGT allowances and lower tax bands.

For example, if one partner has not used their allowance or is in a lower tax band, transferring an asset to them before disposing may reduce CGT.

5. Make sure you claim reliefs if eligible

Some reliefs are particularly relevant for business owners and side hustlers:

• Business Asset Disposal Relief (BADR): If you sell all or part of a business or qualifying shares, you may pay only 10% CGT (subject to conditions and lifetime limits).
• Incorporation Relief, Rollover Relief, Hold‑over Relief: These allow you to defer or reduce a gain where you reinvest, transfer, or restructure.
• Private Residence Relief (PPR): If you sell your main home, you may be exempt from CGT for the period you lived there.

Check with a professional adviser (such as an accounting firm in London) to confirm you meet all eligibility conditions.

6. Use “bed & breakfast” or “bed & spouse” planning carefully

For shares/funds, some investors sell and repurchase to crystallise gains in a favourable year. Alternatively transferring to a spouse then disposing can help utilise both allowances/bands. Be aware there are anti‑avoidance rules, so you must do this properly and with professional advice.

7. Non‑residence strategy (only where genuine)

If you are genuinely non‑UK resident, the rules for CGT can change, especially for UK residential property. However, this is a complex area and you must be beyond the “temporary non‑resident” rules.

It is not simply a planning trick and must satisfy HMRC tests. If done correctly, it may provide relief, but professional advice is essential.

8. Timing disposal of residential property

When disposing of UK residential property, ensure you meet or maximise your Private Residence Relief, keep records of any letting periods, and quickly file the UK property CGT return (within 60 days) if CGT is due.

Failure to meet deadlines or miscalculate may cost you tax, interest, or penalties.

Why you should engage professional help (especially a trusted accounting firm in London)

Even with the above strategies, CGT planning is not “one size fits all”. Your individual circumstances, multiple assets, business structure, residence status and future plans all matter. A specialist adviser can:

• Review your ownership history, acquisition costs, improvements, and disposals.
• Apply the correct reliefs and check eligibility (for example BADR, PPR, rollover relief).
• Advise on timing of disposals to maximise tax efficiency.
• Help you keep compliant with filing deadlines (important for UK property).

At ABM Chartered Accountants, we act as your strategic tax partner for side hustles, investment disposals and business‑exit planning.

Step‑by‑step checklist for minimising CGT

Here’s a quick summary table you can use:

Step	Action	Benefit
1	Identify all assets you may dispose of in next 12–24 months	Allows early planning
2	Calculate purchase cost, improvements, disposal costs for each asset	Accurate gain calculation = accurate tax
3	Project your income tax band for the year of disposal	Choose timing when tax band is lower
4	Check eligibility for reliefs (BADR, PPR, rollover, hold‑over)	Potential tax rate reduction or deferral
5	Consider spouse/civil partner transfers if appropriate	Double allowances, lower band utilisation
6	Ensure for residential property: residence history, letting periods, 60‑day rule	Maximise relief, avoid penalties
7	Plan disposal across tax years to use annual exempt amount	Spread gains to save tax
8	Use professional adviser for complex disposals or business assets	Ensure full relief eligibility, compliance

Common pitfalls and how to avoid them

• Mis‑calculating the base cost for an asset (forgetting improvement costs) → keep invoices, works certificates.
• Assuming reliefs apply automatically – many reliefs have strict conditions (e.g., business must be trading, time‑owned for certain period) → check before relying.
• Ignoring the impact of income tax on CGT rate – gaining disposal in a year with high income may push you into higher rate band → consider timing.
• Late filing of UK property CGT returns or missing 60‑day rule → leads to interest/penalties.
• Non‑residence planning that fails HMRC tests → you may still face CGT or face additional complications.
• Holding multiple assets and disposing in “one go” → you may exceed annual exempt amount and enter higher band; better to spread.

Final word

If you’re busy hustling hard with side businesses, investments and property deals, CGT need not become a costly afterthought. The key is to plan ahead rather than reacting when the disposal happens.

At ABM Chartered Accountants we specialise in advising ambitious hustlers, entrepreneurs and those looking to optimise tax on asset disposals. If you’re thinking of selling investments, property or business assets, now is the time to engage with us so you can minimise CGT and keep more of your gains. Contact us to discuss your situation and map out a tax‑efficient strategy.