UK Capital Gains Tax Allowance 2025/26: Rules, Rates & Reliefs

If you are considering selling or disposing of an asset in the UK — whether that’s shares, a second property, business interests or other investments — it is essential to understand the rules for Capital Gains Tax (CGT) in the tax year beginning 6 April 2025 and ending 5 April 2026 (the 2025/26 tax year). In this article, we provide a comprehensive guide to the allowance, rates and reliefs. Whether you are based in London and working with a Canary Wharf Accountant or located elsewhere, you will benefit from understanding the key changes and how they may affect your tax position.

What is Capital Gains Tax?

Capital Gains Tax is the tax payable on the profit (gain) made when you dispose of certain assets that have increased in value. The gain is calculated as the disposal proceeds minus allowable costs (such as the purchase cost, any allowable improvement costs, fees etc). CGT applies to individuals, trustees and personal representatives (but note companies are subject to Corporation Tax on chargeable gains instead).

Examples of disposals that may give rise to CGT include:

• Selling shares or investments that are not held in tax-sheltered wrappers (e.g., ISAs or pensions).
• Selling a second property or a property that has not qualified for full main-residence relief.
• Disposals of some business assets or interests in trading companies.
• Gifts (in some circumstances) or exchanges of assets.

CGT does not typically apply to your main residence in many cases (thanks to Private Residence Relief) — but there are conditions to check.

Annual Exempt Amount (Allowance) for 2025/26

One of the first numbers you should check is the annual exempt amount (AEA), sometimes described as the tax-free allowance for gains. For the 2025/26 tax year:

• For individuals, the exempt amount is £3,000.
• For trusts, the allowance is £1,500.

This means that if your total net gains in the tax year (after deducting allowable losses and costs) are below £3,000 for an individual (or £1,500 for a trust) then you would not pay CGT. Gains above that threshold will be subject to tax.

Why is the allowance important?

• The allowance reduces the taxable gain — you deduct the allowance from your net gains to arrive at the amount subject to CGT.
• You cannot carry unused allowance forward. If you don’t use it in the tax year, you lose it.
• Because the allowance has been significantly reduced in recent years (from £12,300 in 2022/23 to £6,000 in 2023/24, to £3,000 now) taxpayers need to be more alert.

Practical point for clients of a Canary Wharf Accountant

If you expect to make gains in the coming year — for example from selling investments or second property — and your gains approach the £3,000 allowance, it is worth reviewing whether you can schedule disposals or offset losses to optimise your tax position. A professional adviser such as a Canary Wharf Accountant can help you plan around this threshold.

CGT Rates for 2025/26

Once your gain exceeds the exempt amount, the rate of CGT you pay depends on:

• Your total taxable income (for the year) plus the gain amount (because the gain is added to your income to determine the rate band)
• The type of asset disposed of (e.g., residential property may attract special rules)

Standard Rates

For most assets disposed of on or after 6 April 2025:

• If your total income + taxable gain remains within the basic rate band, the CGT rate is 18%.
• If your income + gain pushes you into the higher rate band, the CGT rate is 24% on the portion of the gain above the basic-rate band threshold.

How the calculation works

Here’s a simplified step-by-step approach:

1. Calculate your taxable income for the year (income subject to income tax).
2. Calculate your net gains (asset disposal gains minus allowable costs and minus any allowable losses).
3. Deduct the annual exempt amount (£3,000) from the net gains.
4. Add the remainder of gains to your taxable income to determine whether you stay in the basic rate band or move into the higher rate band.
5. Apply 18% on the part of the gain that, when added to income, stays within the basic rate band; apply 24% on the part that is above the basic rate threshold.

Example

Suppose you have taxable income (after personal allowance) of £20,000 and you realise a gain of £12,600 (after costs) in 2025/26:

• Deduct the annual exempt amount: £12,600 − £3,000 = £9,600 taxable gain.
• Add to income: £20,000 + £9,600 = £29,600 — still within the basic rate band (£37,700 for 2025/26).
• CGT = 18% of £9,600 = £1,728.

If instead you made a gain of £52,600:

• Net gain taxable = £52,600 − £3,000 = £49,600.
• Income + gain = £69,600. The basic rate band is £37,700. So:
  • £17,700 of the gain pushes you to the top of the basic rate band → taxed at 18% = £3,186
  • The remaining £31,900 of gain taxed at 24% = £7,656
  • Total CGT = £10,842.

Special Cases

• Gains from carried interest (for investment fund managers) may attract different rates (32% from 6 April 2025).
• Disposals by trustees or personal representatives may also face different rules.

Note for property disposals

While the standard rates apply to many assets, disposal of residential property that is not your main home has specific rules. However, as of the recent changes, the 18% / 24% regime generally applies even to residential property disposals (subject to other reliefs and conditions).

Reliefs and Exemptions

Beyond the allowance and standard rates, several reliefs and exemptions can reduce or eliminate your CGT liability. Understanding these is critical — especially for high-net-worth clients or business owners.

Private Residence Relief (PRR)

If the asset you dispose of is your main home, you may qualify for full or partial Private Residence Relief. This means no CGT (or a reduced charge) may apply if all the conditions are met (e.g., you have lived in the property as your only or main home for the entire period of ownership, it has not been let out, etc).
While the main provisions are outside the scope of this article, it remains one of the most important reliefs for individuals.

Transfer Between Spouses/Civil Partners

Transfers of assets between spouses or civil partners are generally exempt from CGT (if the transfer is made without consideration) which means you can use both spouses’ annual exempt amounts and potentially optimise CGT.

Use of Tax-Efficient Wrappers

Holding investments within a tax-efficient wrapper such as an ISA or pension means the gains are free of CGT, so ensuring your investment planning takes this into account is key.

Losses

If you have incurred capital losses (e.g., from selling an asset at a loss), you can offset those losses against gains in the same tax year, or carry them forward to future tax years (provided they are registered with HMRC). This reduces your taxable gain and hence CGT.

Business Asset Disposal Relief (BADR)

For business owners disposing of qualifying business assets or shares in a trading company, the relief known as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is relevant. Key points:

• Gains qualifying for BADR are subject to a reduced CGT rate (lower than the 18%/24%).
• From 6 April 2025, the CGT rate for gains qualifying for BADR rises from 10% to 14%. From 6 April 2026, it is set to rise further to 18%.
• There is a lifetime limit on the amount of gains that can qualify (currently £1 million).
• Strict eligibility conditions apply (ownership of business for at least two years, trading company, etc).

This relief can be very valuable for business owners — but because the favourable rate is changing, the timing of a disposal may matter significantly.

Other Reliefs & Exemptions

• Gifts to charities are generally exempt from CGT.
• Transfers on death generally benefit from an uplift in base cost (for CGT purposes) to market value at date of death.
• Some reliefs exist for reinvestment in certain schemes (e.g., Enterprise Investment Scheme, Venture Capital Trusts) though these are more specialist.
• For trusts and estates, specific reliefs/exceptions apply.

Key Changes for 2025/26 That You Should Know

In the years before 2025/26 the CGT regime has undergone noteworthy changes. Here are the main ones driving current planning considerations:

1. The annual exempt amount has been reduced and stabilised at £3,000 for 2025/26.
2. The main CGT rates for non-property assets have moved to align with property rates: 18% / 24%.
3. The preferential rate for Business Asset Disposal Relief will increase from 10% to 14% from 6 April 2025 (and 18% from 2026). That means business exits after that date will face higher CGT.
4. With the allowance reduced and rates increased, more taxpayers may find themselves liable for CGT when previously they may not have been.
5. Trustees’ allowance remains at £1,500, and other specific trust rules continue to apply.

Planning Considerations & Best Practice

As experienced advisers at ABM Chartered Accountants (and for clients looking for a Canary Wharf Accountant) we recommend the following planning approaches to help manage CGT exposure:

1. Review Timing of Disposals

If you are considering selling an asset, the timing relative to the tax year matters. Since the allowance is fixed and the rates apply in the year of disposal, you might:

• Consider spreading disposals across tax years if gains are large enough to exceed the allowance.
• For business owners, consider whether an exit before 6 April 2025 (locking in the 10% BADR rate) is plausible, versus later when the rate rises to 14%.
• Use the current tax year’s allowance fully — since unused allowance cannot be carried forward.

2. Offset Losses

Make sure you have reported any capital losses to HMRC (within the four-year period) so you can offset those against gains. This reduces taxable gains and hence CGT.

3. Use Tax-Efficient Wrappers

Ensure you maximise ISA allowances or pension contributions where appropriate — gains within these wrappers are exempt from CGT. If you hold investments outside these wrappers, consider whether you can shift them into tax-efficient vehicles.

4. Utilise Spouse/Civil Partner Transfers

Transferring assets between spouses/civil partners (where permissible) may allow use of both annual exemptions and potentially apply the lower rate band for each partner. Timing and ownership structure matter.

“Regular disposals of investments each year to take advantage of the annual capital gains tax exemption can protect you against a hefty future CGT bill when you come to dispose of an investment.”

5. Business Exits & BADR

If you run a trading business and are planning an exit:

• Check you meet eligibility for BADR (e.g., shareholding, trading status, timing).
• If a sale is imminent, consider whether doing so before 6 April 2025 gives you the 10% rate. After that, the relief rate increases to 14%.
• Consider wider planning (such as reinvestment of proceeds, wealth planning, estate planning).

6. Adequate Record-Keeping & Reporting

• Keep detailed records of acquisition costs, improvement costs, fees, dates, sale proceeds, asset cost bases — this allows correct calculation of gains and use of reliefs.
• Ensure you make any Self Assessment reporting or other CGT declarations in a timely manner.
• For disposals of UK residential property, there are additional reporting and payment deadlines (e.g., within 60 days).

7. Seek Specialist Advice

CGT can get complex when dealing with:

• Portfolio disposals
• Overseas elements (non-UK residents, non-dom issues)
• Private companies / shareholdings / restructurings
• Trusts / estates
• High-value property or mixed-use property

Engaging a professional — for example choosing ABM Chartered Accountants or a dedicated Canary Wharf Accountant for London-based clients — ensures you benefit from bespoke planning, eligibility checks, and up-to‐date awareness of legislative changes.

Why choose ABM Chartered Accountants for CGT advice (and Canary Wharf Accountant clients)?

At ABM Chartered Accountants, we specialise in personal tax, corporate tax and capital gains planning. If you are based in London (including Canary Wharf) or have complex asset portfolios, working with a friendly, expert adviser helps you:

• Understand the CGT rules for 2025/26 and how they apply to you.
• Identify and claim all available reliefs and exemptions.
• Optimise the timing of asset disposals.
• Incorporate CGT planning into wider strategies (such as estate planning, business exits, investment structuring).
• Stay compliant with HMRC reporting and deadlines.

Whether you are looking for a “Canary Wharf Accountant” familiar with London-based property, investment and business owner issues, or a professional across the UK, we can tailor our service to your needs.

Conclusion

The 2025/26 tax year presents a more challenging environment for capital gains planning: a low annual exempt amount (£3,000), relatively high CGT rates (18%/24%), and increasing complexity for business owners (with BADR rate rising). But with proactive planning, the right advice and the use of reliefs, you can still manage your tax exposure effectively.

If you are anticipating a disposal of assets — shares, second property, business interests — and want to understand your CGT position, get in touch with ABM Chartered Accountants. Whether you are in Canary Wharf or elsewhere, we can help you navigate the rules, optimise your position and ensure you meet HMRC obligations.

Frequently Asked Questions (FAQs)

Q: Can I carry forward my £3,000 allowance if I don’t use it this year?

A: No — the annual exempt amount is “use it or lose it”. Losses can be carried forward, but the allowance cannot.

Q: Does the £3,000 allowance apply separately to each spouse?

A: Yes. Each individual has their own allowance. Transfers between spouses (asset transfers) can help utilise both allowances, but professional advice is advised.

Q: What happens if my income + gain straddles the basic rate band boundary?

A: You will pay 18% on the portion of gain that falls within the basic rate band and 24% on the portion above it. Example provided earlier.

Q: Are there special rules for people selling their shareholdings in a company?

A: Yes — that may qualify for Business Asset Disposal Relief subject to conditions. From 6 April 2025 that relief rate rises from 10% to 14% for qualifying gains up to the lifetime limit.

Q: If I hold investments via an ISA, do I pay CGT?

A: No — gains within an ISA are exempt from CGT, so using tax-efficient wrappers is an effective strategy.