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🇬🇧 United Kingdom 8 min read

UK Capital Gains Tax: Rates, Allowances and Planning

Capital gains tax used to feel like a tax for other people — the kind of thing that happened when you sold a buy-to-let or a beach hut in Cornwall. Then the annual exemption got chopped from £12,300 to £3,000, the rates nudged up, and suddenly your everyday Stocks and Shares GIA has become a CGT problem in waiting. Let's walk through how it actually works and where the levers are.

What CGT Is (and Isn't)

Capital gains tax is what HMRC takes when you dispose of an asset for more than you paid for it. "Dispose" is the sneaky word — it doesn't just mean sell. Gifting an asset, swapping it, or transferring it into a trust are all disposals in the eyes of HMRC.

What it mostly doesn't touch: your main home (covered by Private Residence Relief), anything inside an ISA or pension, your car, Premium Bonds and winnings, ISAs passing to a surviving spouse via APS, and transfers between spouses or civil partners. Those last two are the quiet heroes of UK tax planning.

The golden rule: No tax until you sell. A gain that grows and grows inside a GIA is only a problem the day you realise it. That's why timing — and whether you realise gains in one lump or across several tax years — matters so much.

The 2026 Rates and Allowance

After the October 2024 Budget shake-up, the UK now has a two-tier CGT system with residential property sitting slightly higher than everything else. Here's where things land for 2026:

Situation Rate
Basic-rate taxpayer, most assets (shares, funds, crypto) 18%
Higher/additional-rate taxpayer, most assets 24%
Basic-rate taxpayer, residential property 18%
Higher/additional-rate taxpayer, residential property 24%
Business Asset Disposal Relief (first £1m lifetime) 14% (rising to 18% from April 2026)

The annual exempt amount — the slice of gains you can bank tax-free each year — is £3,000. That's down from £12,300 two tax years ago. Couples get one each, so £6,000 between them. Unused allowance does not carry forward — it's genuinely use-it-or-lose-it.

Where Your Other Income Fits In

CGT isn't a flat tax. Your gains stack on top of your income to work out which rate applies. If you've got slack in the basic-rate band, part of your gain might be taxed at 18% and the rest at 24%. Which means a year with lower earnings — a sabbatical, parental leave, the first year of early retirement — can be a surprisingly cheap year to crystallise a big gain.

Working Out a Gain

The maths itself is straightforward. It's the bits around the edges that catch people out.

Example: Selling a Fund in a GIA

Priya bought £20,000 of a global equity fund in a General Investment Account five years ago. It's now worth £32,000. She sells the lot.

Gain: £32,000 − £20,000 = £12,000

Less annual exemption: £12,000 − £3,000 = £9,000 taxable

Tax at 24% (higher-rate earner): £9,000 × 24% = £2,160

Five years ago, the same £12,000 gain would have been covered almost entirely by the £12,300 exemption. Now two-thirds of it is taxable.

Don't forget to deduct allowable costs — dealing charges, stamp duty on shares, estate agent and solicitor fees on property, improvements (not repairs) on property. These reduce the gain pound for pound.

Levers for Reducing Your Bill

1. Use Both Spouses' Allowances and Bands

Transfers between spouses and civil partners are on a "no gain, no loss" basis — no CGT at the point of transfer. So a higher-rate earner can move half of a taxable holding to a basic-rate partner before selling, doubling the £3,000 allowance and potentially shifting some of the remaining gain into the 18% band. For many couples this is the single biggest lever in the toolkit.

2. Bed and ISA (or Bed and SIPP)

Sell a holding in your GIA, repurchase the same (or similar) fund inside your ISA or pension within days. The gain on the sale is realised now — ideally using your £3,000 exemption — but from that moment on, all future growth and income is inside a tax-free wrapper. Over a couple of decades, the tax saved compounds far more than the one-off bill you paid to shift it.

Watch the 30-day rule: If you sell shares and rebuy the same shares in an unwrapped account within 30 days, HMRC matches them for tax purposes and the gain effectively disappears — which sounds great until you realise it also disappears in the sense of "you didn't use your exemption". Bed and ISA sidesteps this because the rebuy is inside the ISA, which isn't the same account for matching purposes. Bed and Spouse works too because you're repurchasing in a different person's name.

3. Stagger Disposals Across Tax Years

The annual exemption resets every 6 April. A £6,000 gain realised half on 5 April and half on 6 April can be completely wiped out by two years' worth of exemptions. For a larger unwrapped portfolio, a multi-year "defusing" programme — selling just enough each year to soak up the £3,000 — can quietly dismantle the CGT problem without ever paying tax on it.

4. Bank Losses Deliberately

Losses offset gains in the same tax year. Any unused losses carry forward indefinitely (as long as you register them with HMRC within four years of the loss year). If you've got a dud holding you were going to sell anyway, timing the sale for a year with a realised gain turns a bad investment into a tax shield.

5. Gift to Charity

Gifts of qualifying shares or property to a UK charity are exempt from CGT on the donor's side, and you can claim income tax relief on the market value. For older investors with charitable intent and gains they'd otherwise pay 24% on, this is one of the few ways to make a gain genuinely vanish.

The Residential Property Angle

Your main home is covered by Private Residence Relief — no CGT, whatever the gain. But buy-to-let landlords, owners of second homes, and anyone selling a flat they used to live in but later rented out are all in CGT territory.

Two extra wrinkles worth knowing:

Reporting and Paying

For anything other than residential property, CGT is reported through Self Assessment in the tax year you realised the gain. You need to report if:

The bill is due by 31 January following the tax year end. So gains in 2025/26 (6 April 2025 to 5 April 2026) are payable by 31 January 2027. HMRC's "Real Time" CGT service lets you report early and pay sooner if you'd rather not have the liability hanging over you.

A Worked Retirement Example

Example: Defusing a £40,000 Unwrapped Portfolio

Tom is 58 and sitting on £40,000 of gain in a GIA he built up before maxing his ISA. He's a higher-rate earner so a sale today would cost him around £8,880 in CGT (£40,000 − £3,000 exemption, × 24%).

Option A: Sell the lot now. £8,880 tax.

Option B: Bed and ISA £3,000 of gain per year into his £20,000 ISA allowance, using the annual exemption each time. After about 13 years, the entire gain is sheltered inside an ISA with £0 in CGT paid. Future dividends and growth are tax-free for life.

Option C: Split across himself and his basic-rate spouse. £6,000 exemption each year, and the taxable portion of his wife's share is taxed at 18% rather than 24%. Cuts the bill in roughly half if done in one go; to zero if spread over several years.

How Talk Through Wealth Helps

CGT is one of those taxes where the right strategy depends on your numbers — your other income, your ISA allowance, your spouse's tax band, the size and composition of your unwrapped holdings. Talk Through Wealth can:

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Disclaimer: This article is for educational purposes only and does not constitute financial or tax advice. CGT rates, allowances, and reliefs can change from one Budget to the next. Consult a qualified tax adviser or accountant for advice specific to your situation.