Capital Gains Tax Allowance 2025/26: What UK Investors Should Know

As tax regimes shift, UK investors must stay ahead of the curve. One of the biggest changes for 2025/26 is to the Capital Gains Tax (CGT) regime — notably, the drop in the tax-free allowance and the changes in rates for certain reliefs. For anyone holding or buying assets (shares, property, investment funds, etc.), understanding the 2025/26 CGT rules isn’t optional — it’s essential.

In this post, we’ll walk through the CGT allowance and rates for 2025/26, how the tax is calculated, what reliefs you can still claim, planning strategies, and pitfalls to avoid.

What Is Capital Gains Tax and Why It Matters to Investors

• Definition: Capital Gains Tax is a tax on the profit when you dispose of (sell or otherwise “dispose”) certain assets that have increased in value. You pay CGT only on the gain, not the total sale proceeds.
• Scope: Applies to disposals of shares, securities, investment property (not your main home, subject to exceptions), certain personal assets, and more.
• Why Investors Care: Capital gains are often a major part of returns. A higher CGT bite can erode net returns, so tax planning is integral to investment strategy.

The 2025/26 Annual Exempt Amount (CGT Allowance)

One of the most significant changes for 2025/26 is the reduction in the CGT exempt allowance (also called the Annual Exempt Amount).

• For individuals, the CGT allowance (annual exempt amount) in 2025/26 is £3,000.
• For most trusts, the allowance is £1,500.
• Any gain above that threshold is taxable (after applying reliefs and losses).
• Note: This allowance is not cumulative. If you don’t use it in one year, you lose it (you can’t carry it forward).

Historical Context & Trends

• In prior years, the CGT allowance was much higher (for example, in 2022/23 it was £12,300)
• The reduction to £3,000 reflects government efforts to raise more revenue from capital gains.
• This sharper squeeze means more investors will be pushed into CGT liability even for modest gains.

CGT Rates for 2025/26: What’s Changed

Main CGT Rates for Individuals (non-residential property, non-carried interest)

• For disposals made on or after 30 October 2024, the main CGT rates (for gains on assets that aren’t residential property or carried interest) have increased:
  • 18% for gains that fall within the basic rate band (i.e. when your total income + taxable gains stay within your basic rate tax bracket)
  • 24% for gains that fall above the basic rate band (i.e. when pushed into higher rate)
• For carried interest gains, the rate is 32% (from 6 April 2025 onward).
• For residential property disposals, the higher rates remain: 18% (within basic band) / 24% (above basic band)

Business Asset Disposal Relief (BADR) / Investors’ Relief

• From 6 April 2025, the rate for gains qualifying for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) and Investors’ Relief will increase from 10% to 14%.
• From 6 April 2026, that rate is planned to increase further — for instance, for some investors it may move toward 18%.
  

Summary Table (2025/26)

Type of Gain / Relief	Rate within Basic Band	Rate above Basic Band / Higher Rate
Non-residential asset gains	18%	24%
Residential property (non-PRR)	18%	24%
Carried interest	—	32%
Business Asset Disposal Relief / Investors’ Relief (qualifying)	14%	14%

⚠️ Note: “Within basic band” means your total income + gain remains under the basic rate threshold; “above basic band” means part or all of it pushes you into the higher rate.

How CGT Is Computed: Step-by-Step Example

To help investors, here’s how you might compute CGT for 2025/26:

Example

• Taxable income (after personal allowance & deductions): £20,000
• Capital gain (disposal of shares): £12,600
• Annual Exempt Amount (AEA): £3,000

Step 1 – Subtract the AEA
Gain above allowance = £12,600 − £3,000 = £9,600 taxable gain.

Step 2 – Add to taxable income to see band position
£20,000 + £9,600 = £29,600 — this is still under the basic rate threshold (for example, basic rate cap ~ £37,700 in that illustrative context).

So the entire £9,600 is taxed at 18% => £1,728 CGT.

If instead your gain were very large, part of the gain could fall into the 24% band — the split is done by seeing how much “headroom” remains in the basic rate band after adding your income.

Another example (larger gain):

• Taxable income: £20,000
• Gain: £52,600
• Deduct AEA of £3,000 → £49,600 taxable gain
• Combined = £20,000 + £49,600 = £69,600
• If basic rate ceiling is ~ £37,700, then you pay:
  • 18% on the portion that stays within basic band (£17,700)
  • 24% on the remainder (£31,900)
• Total CGT = £10,842 (per example from GOV.UK)

You can tailor these illustrative numbers based on actual thresholds in a given year.

6. Reliefs & Allowances Investors Should Know

When understanding CGT liability, investors should be aware of reliefs and allowances that can reduce tax:

Private Residence Relief (PRR)

• Your main home (principal private residence) is generally exempt from CGT under Private Residence Relief, subject to conditions and apportionments for periods of non-occupation.
• If parts of the property are used for business or let out, those portions may lose relief.

Transfers Between Spouses / Civil Partners

• Transfers of assets between spouses or civil partners are typically made on a “no gain / no loss” basis — meaning no CGT arises at the time of transfer.

Business Asset Disposal Relief (BADR) / Investors’ Relief

• If you qualify (e.g. you’re a business owner or have qualifying shares), gains up to a lifetime limit can be taxed at the favorable rate (14% from 6 April 2025) instead of the standard CGT rates.
• Note the lifetime limit (for qualifying gains) and eligibility conditions must be satisfied.

Holdover Relief / Rollover Relief

• In certain circumstances, you can defer CGT by “rolling over” gains into a replacement asset or by holding over gains when gifting business assets, agricultural property, etc. (if conditions satisfied).
• This relief postpones the tax liability to a future point. (Detailed rules depend on the asset class.)

Entrepreneurs’ / Investors’ Relief (historical)

• These reliefs have changed; previously, lower rates (e.g. 10%) applied, but as noted above, rates are being altered for disposals from April 2025.

Offsetting Losses & Carry-forward Rules

To reduce CGT liability, investors should understand how losses can be used:

• Capital losses in the same tax year: You can offset losses on one asset against gains on another, before applying the annual exempt amount.
• Carry forward unused losses: If you have more losses than gains in a year, you can carry forward those losses indefinitely (to offset future gains).
• Time limit for reporting losses: To claim certain capital losses, you may need to notify HMRC within specific time windows (e.g. within 4 years for some losses, or 30 days in certain cases).

This makes documenting transactions, and tracking loss events, vital for CGT planning.

Special Cases, Traps & Pitfalls for Investors

Investors should watch out for:

• “Mixed use” assets: For example, property partly used for business or rented can complicate the relief regime.
• Assets disposed under contract before rate change: Contracts entered before 30 October 2024 but completed later might have transitional rules.
• Share reorganisations & elections: Some reorganisations require elections to preserve reliefs; timing matters.
• Non-UK residents or new residents: Non-residents disposing of UK property may still have CGT obligations; new UK residents may have transitional regimes.
• High turnover / trading vs investment: HMRC may treat frequent disposals as trading, which might bring them into income tax rather than CGT.
• Ignoring micro gains: With the CGT allowance so low (£3,000), many smaller disposals now trigger CGT, so even moderate investors can find themselves within the charge net.
• Forfeiting the exemption: If you don’t use your CGT allowance in a year, it’s lost—there’s no carry-forward.

Planning Strategies to Minimise CGT (Ethical, but Efficient)

Here are some practical tips and strategies for UK investors to legally optimise their CGT exposure:

1. Use the annual allowance each year
   If feasible, crystallise gains up to £3,000 each year to make full use of the exemption.
2. Time disposals tactically
   Use years when your income is lower (so more of the gain falls in the lower band)
3. Use spouses / civil partner allowances
   Transfer assets to spouse/partner (on no gain/no loss basis) so both can use their allowances.
4. Offset capital losses
   Realise losses strategically to offset gains, and ensure losses are properly claimed and carried forward.
5. Hold for relief-qualifying assets
   Invest in assets eligible for Business Asset Disposal Relief / Investors’ Relief if meeting criteria.
6. Use tax-efficient wrappers (ISAs, Pensions, etc.)
   Gains within ISAs or pension wrappers are typically free from CGT — investing via those vehicles shields gains.
7. Stagger disposals
   Avoid disposing of too many assets in one tax year; spread disposals across years.
8. Watch the timing of contracts
   For dispositions around the rate change, ensure contracts and completions are timed optimally (complying with transitional rules).
9. Be aware of planning anti-avoidance rules
   Ensure strategies are commercially justifiable, and avoid aggressive tax avoidance that could trigger HMRC challenge.

Deadlines, Reporting & Payment Rules

• Self Assessment: CGT is reported via your Self Assessment tax return (if you are required to file), typically by 31 January following the end of the tax year.
• Payment due: CGT is payable by 31 January (same date as income tax) for UK residents.
• 60-day rule for property disposals: If you dispose of UK residential property (not your main home), you may need to pay a CGT liability within 60 days of completion.
• Reporting outside Self Assessment: In some cases, a standalone “Capital Gains Tax on UK property account” needs to be used.
• Record keeping: You should maintain detailed records of acquisition costs, disposal proceeds, transaction costs, reliefs claimed, and more for at least 6 years (or longer) in case HMRC requests evidence.

Forecasts & Policy Changes: What Investors Should Watch

• The CGT regime has recently been under scrutiny by the government — allowances have been cut, and rates increased.
• Some commentators expect further tightening, or additional anti-avoidance measures.
• Also monitor changes to thresholds in Income Tax (since CGT bands depend on your income band).
• Legislative changes may affect reliefs or introduce new rules (e.g. for carried interest, new residence regimes).
• Investors should stay alert around Autumn Budgets and Finance Bills, as CGT is often a target for revenue raising.

Conclusion & Key Takeaways

• The 2025/26 CGT regime tightens the tax burden: the annual exempt amount is reduced to £3,000 for individuals.
• CGT rates have increased: 18% / 24% for normal gains; 32% for carried interest; and 14% for qualifying business gains under BADR/Investors’ Relief.
• All investors — large or small — must revisit their CGT planning.
• Using reliefs, offsets, timing strategies, and tax wrappers (ISAs, pensions) can mitigate the burden.
• Keep solid records and file/report on time to avoid penalties.

How ABM Digital Accountants Can Help

At ABM Digital Accountants, we specialise in advising UK investors, whether domestic or abroad, on optimising tax strategies under evolving laws. If you’d like help with:

• Reviewing your current and forecast CGT exposure
• Structuring disposals and investments to minimize tax
• Navigating relief elections and transitional rules
• Preparing your Self Assessment and CGT reporting

Just reach out. We’re ready to help you stay tax-efficient and compliant for the 2025/26 tax year and beyond.