Capital Gains Tax Allowance 2025/26: UK Rates, Exemption Limits, & Smart Planning

The capital gains tax allowance 2025/26 stands at £3,000 for individual UK taxpayers across the current tax year (6 April 2025 to 5 April 2026).

Sell or dispose of an asset above this Annual Exempt Amount, and HM Revenue & Customs taxes any remaining profit at either 18% or 24%, depending on your income tax band.

Key Takeaways

• The individual Annual Exempt Amount for the 2025/26 UK tax year is frozen at £3,000 and cannot be carried forward to future years.

• Tax rates for basic rate taxpayers stand at 18 percent while higher rate taxpayers pay 24 percent on taxable gains for property and shares.

• Married couples and civil partners can transfer assets tax-free to combine individual thresholds and shield up to £6,000 in net gains.

• Disposals of UK residential property generating a tax liability must be reported and paid to HMRC within 60 days of transaction completion.

What Is the Capital Gains Tax?

Capital Gains Tax (CGT) is a UK tax charged on the profit or gain made when selling, gifting, exchanging, or disposing of an asset that has appreciated in value. It applies strictly to the net financial gain realized during the transaction, not the total amount of money received.

In practice, CGT covers most personal assets owned by UK residents, from property and shares to cryptoassets and business equity. You only pay when you actually dispose of an asset, provided your total net profit climbs above your annual allowance.

What Is the Capital Gains Tax Allowance 2025/26?

The capital gains tax allowance for the 2025/26 tax year gives UK taxpayers a tax-free threshold of £3,000 on profits made from selling or transferring assets.

Known officially as the Annual Exempt Amount (AEA), this threshold applies to individuals, sole traders, and personal representatives.

How Does the £3,000 Annual Exempt Amount Work for Individuals?

The £3,000 Annual Exempt Amount gives individual UK tax residents a tax-free allowance against net capital gains realized in the 2025/26 tax year. Unused portions expire at the end of the tax year and cannot be carried forward.

• Use It or Lose It: Unused portions of the allowance automatically expire at midnight on 5 April 2026 and cannot be carried over to 2026/27.

• Joint Ownership: When assets are held jointly by spouses or registered civil partners, each partner can apply their full £3,000 allowance against their share of the gain, protecting up to £6,000 in combined profits.

• Inter-Spouse Transfers: Transfers of asset ownership between spouses or civil partners who live together take place on a no gain, no loss basis, triggering no immediate CGT liability.

What Is the Capital Gains Tax Threshold for Trusts and Estates?

Trustees face slightly tighter rules. For 2025/26, standard settlements receive an annual exemption of £1,500, whereas trusts set up for vulnerable beneficiaries, alongside estates of deceased individuals,  retain the full £3,000 limit.

• Ordinary Trusts: The annual exempt amount for trustees of most settlements is £1,500 (50% of the individual threshold).
• Trusts for Vulnerable Beneficiaries: Settlements created for disabled individuals retain the full £3,000 exemption.
• Estates of Deceased Persons: Personal representatives handling an estate receive the £3,000 exemption for the tax year of death and the subsequent two tax years.
• Multiple Trusts Limitation: When a settlor creates multiple trusts, the available annual allowance per trust is reduced proportionately, subject to a statutory minimum of £300 per trust.

What Are the UK Capital Gains Tax Rates for the 2025/26 Tax Year?

The UK Capital Gains Tax rates for 2025/26 are 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers across all main asset classes. Your rate depends on your total taxable income combined with your taxable capital gains.

Asset Category	Basic Rate Taxpayer	Higher / Additional Rate
Residential Property	18%	24%
Shares, Crypto & Investments	18%	24%
Commercial Property & Land	18%	24%
Business Asset Disposal Relief (BADR)	14%	14%
Carried Interest	32%	32%
Trusts & Estates	N/A	24%

Basic Rate vs Higher Rate Taxpayer Thresholds

Which rate you pay comes down to your total taxable income, combining salaries, rental profits, and dividends, against the £12,571 Personal Allowance and £50,270 basic rate ceiling.

To determine the exact tax rate applied to your gains:

1. Calculate your overall taxable income after deducting your Personal Allowance and allowable income tax reliefs.
2. Calculate your total capital gains for the tax year across all asset sales.
3. Deduct allowable costs, eligible capital losses, and your £3,000 Annual Exempt Amount to establish the taxable capital gain.
4. Add the remaining taxable gain directly to your taxable income.
   • Any portion of the gain that falls within the unused space of your basic rate income tax band (up to £37,700 above the Personal Allowance) is taxed at 18%.
   • Any remaining portion of the gain that breaches the £50,270 total income threshold is taxed at 24%.

Example: A basic rate taxpayer earning £30,000 who realizes a net chargeable gain of £10,000 after allowance deductions pays 18% CGT on the entire £10,000 because their total combined sum (£40,000) remains below the £50,270 threshold.

Do You Pay Capital Gains Tax if Total Income Is Below the Personal Allowance?

Yes, you still owe Capital Gains Tax if your net profits pass £3,000, regardless of whether your earnings sit well under the £12,571 Personal Allowance.

While you cannot use spare Personal Allowance to soak up investment profits, staying in a lower income bracket keeps your basic rate band open so gains are taxed at 18% instead of 24%.

How to Calculate Capital Gains Tax?

To calculate Capital Gains Tax in the UK, subtract allowable purchase fees, sales costs, capital improvements, and your £3,000 allowance from the final sale price, then apply your 18% or 24% tax rate.

1. Calculate Gross Realized Profit: Subtract the original purchase price paid for the property from the gross selling price achieved.

2. Deduct Direct Purchase Costs: Deduct initial Stamp Duty Land Tax (SDLT), conveyancing solicitor fees, surveyor fees, and land registry charges incurred during acquisition.

3. Deduct Direct Sale Costs: Deduct estate agency fees, legal fees, and marketing costs incurred during the final sale transaction.

4. Deduct Allowable Capital Improvements: Deduct expenditure on physical structural enhancements that add long-term value (such as property extensions, loft conversions, or installing fitted systems). Routine maintenance or redecoration costs cannot be deducted.

5. Deduct Annual Exempt Amount: Subtract your £3,000 capital gains tax allowance for the 2025/26 tax year.

6. Apply Applicable Tax Rate: Multiply the final net figure by 18% or 24% based on your individual tax band position.

How Is Capital Gains Tax on Property Calculated for 2025/26?

Capital Gains Tax on property is calculated by taking the total sale price and deducting original purchase costs, conveyancing fees, capital enhancements, and the £3,000 allowance before taxing the remainder at 18% or 24%.

Worked Example: Buy-To-Let Sale

Calculation Step	Amount
Gross Selling Price	£300,000
Less Original Purchase Price	-£200,000
Gross Capital Gain	£100,000
Less Legal & Estate Agency Fees	-£6,000
Less Capital Improvements (Extension)	-£4,000
Net Capital Gain Before Exemption	£90,000
Less Annual Exempt Amount (2025/26)	-£3,000
Total Chargeable Taxable Gain	£87,000
Tax Payable (Higher Rate @ 24%)	£20,880

What Expenses Are NOT Deductible for Capital Gains Tax?

HMRC draws a firm line here: general upkeep, redecoration, and mortgage interest never qualify for tax relief. You can only deduct genuine capital improvements, such as adding an extension or converting a loft, that permanently boost the property’s overall value.

How Capital Gains Rules Apply Across Specific Assets?

Capital Gains Tax rules vary by asset class, offering total tax exemption for primary residences and ISAs while enforcing strict matching rules on investments.

How Does Private Residence Relief Impact Property Sales?

Selling your main home rarely triggers a tax bill. Thanks to Private Residence Relief (PRR), any profit made while the property served as your sole primary residence remains completely exempt from CGT. Partial CGT liability applies if:

• The property was let out to commercial tenants or used partly as a second home.

• The total plot size exceeds 0.5 hectares (inclusive of gardens and outbuildings).

• Part of the property was used exclusively for business purposes.

How Does Capital Gains Tax Apply to Shares, Crypto, and Investments?

Selling shares, mutual funds, or digital assets like cryptocurrency triggers CGT when total net profits across all sales exceed £3,000 within the tax year.

For long-term investors, calculating liabilities on equity investments like capital gains tax on shares held for 10 years requires careful tracking of your original cost basis alongside allowable deductions.

• Share Matching Rules: When trading listed equities, HMRC enforces strict matching rules (the same day rule and 30-day bed-and-breakfasting rule) to prevent artificial loss manufacturing.

• Tax Wrappers: Gains generated on assets held inside a Stocks & Shares ISA or an approved pension scheme are 100% exempt from CGT and do not use up any of your £3,000 allowance.

How Has the Capital Gains Tax Allowance Changed Over Recent Years?

The Annual Exempt Amount has been scaled back significantly by HM Treasury to increase tax yield from asset sales.

Tax Year	Individual Exemption (AEA)	Standard Basic CGT Rate	Standard Higher CGT Rate
2022/23	£12,300	10% (18% Property)	20% (28% Property)
2023/24	£6,000	10% (18% Property)	20% (28% Property)
2024/25	£3,000	18% (Across main assets)	24% (Across main assets)
2025/26	£3,000	18% (Across main assets)	24% (Across main assets)

Business Asset Disposal Relief Changes for 2025/26

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, allows qualifying business owners, sole traders, and company directors selling business assets or shares to access lower CGT rates.

• Rate Increase for 2025/26: For disposals made between 6 April 2025 and 5 April 2026, the qualifying BADR tax rate is 14% (up from the historical 10% rate).

• Lifetime Cap: The lifetime limit for qualifying claims remains capped at £1 million per individual.

A director selling qualifying business shares in July 2025 generating a £500,000 gain will pay a 14% BADR rate on eligible profits above the £3,000 exemption allowance, resulting in a £69,580 tax charge.

How Can UK Taxpayers Legally Avoid or Reduce Capital Gains Tax?

UK tax legislation provides several legitimate methods to minimize, defer, or manage capital gains tax liabilities.

Strategy	Key Benefit / Mechanism
Spousal Transfer	Combine two individual allowances to shield up to £6,000 in net gains.
Bed & ISA Transfer	Sell taxable assets and re-buy them within an ISA to shelter future gains.
Capital Loss Offsetting	Deduct recorded losses from gross gains to reduce taxable profit.
Pension Contributions	Extend your basic rate income tax band threshold to access the lower 18% rate.

Spousal Transfers and Double Exemptions

Transfers of assets between spouses or civil partners who live together are treated as taking place on a no gain, no loss basis under UK tax law.

By transferring a portion or full ownership of an asset to your partner prior to an external sale, you can utilize two individual £3,000 annual exempt allowances (£6,000 combined).

If your partner is in a lower income tax band, transferring the asset also allows the gain to be taxed at 18% rather than 24%.

Maximizing Stocks & Shares ISAs and Pension Contributions

Moving assets into tax-sheltered wrappers prevents future investment gains from incurring capital gains tax liabilities:

• Bed & ISA Transfers: You can sell investments held in a taxable general investment account, utilise your £3,000 annual allowance on any profit, and immediately repurchase those assets within a Stocks & Shares ISA (up to the £20,000 annual ISA subscription limit).

• Expanding Income Tax Bands via Pension Contributions: Making personal pension contributions increases your basic rate income tax threshold (£50,270) by the grossed-up value of the pension contribution. This expands the portion of your capital gain taxed at 18% rather than 24%.

A business owner realized a £15,000 taxable gain on non-ISA investments. By transferring a 50% share in the brokerage holding to his civil partner before sale, both partners applied their individual allowances, reducing their combined taxable gain to £9,000 and lowering their total tax bill.

Offsetting Capital Losses Against Taxable Gains

Capital losses made on asset sales can be subtracted directly from capital gains realised in the same tax year.

1. Calculate Net Annual Gain: Deduct allowable current-year capital losses from current-year gross gains before applying the £3,000 exemption limit.

2. Register Unused Losses with HMRC: Report allowable losses to HMRC within four years from the end of the tax year in which the loss occurred.

3. Carry Forward Accumulated Losses: Unused losses carried forward from previous years can be used in future tax years to reduce net gains down to the £3,000 allowance limit.

How and When Do You Report Capital Gains Tax to HMRC?

Capital Gains Tax must be reported to HMRC via a specialized 60-day online return for residential property sales, or via Self Assessment (SA108) by 31 January following the tax year for general assets.

The 60-Day Rule for UK Residential Property Sales

UK residents who dispose of residential property subject to CGT must complete a specialized online report and pay the estimated tax due within 60 calendar days of the completion date.

1. Calculate Net Gain on Property
2. Sign into HMRC Capital Gains Tax Service
3. Submit 60-Day Property Return
4. Pay Estimated CGT Due Within 60 Days
5. Final Reconcile on Self Assessment Return

Failure to submit the UK Property account return or settle the liability within the 60-day window triggers automatic statutory penalties from HMRC alongside compounding interest charges.

Self Assessment Deadlines and Real-Time Reporting

Gains on non-property assets like shares, crypto, or commercial land must be reported via Self Assessment by 31 January following the end of the tax year, or immediately using HMRC’s Real-Time CGT service.

• Self Assessment Tax Return: Disposals made during the 2025/26 tax year must be reported on the Capital Gains Summary pages (SA108) of your Self Assessment return by 31 January 2027.

• HMRC Real-Time Capital Gains Tax Service: Taxpayers who do not normally file a Self Assessment tax return can report gains immediately using HMRC’s online Real-Time CGT service at any point up to 31 December following the end of the tax year.

Conclusion

With the tax-free allowance capped at £3,000, strategic planning is essential. UK taxpayers can manage their CGT exposure by making full use of spousal transfers, tax wrappers (ISAs and pensions), and registered capital losses.

Finally, ensure full compliance by adhering to strict HMRC deadlines, including the mandatory 60-day reporting window for UK residential property

FAQ

What is the capital gains tax exemption limit for 2025/26?

The capital gains tax exemption limit for the 2025/26 UK tax year is £3,000 for individuals, personal representatives, and vulnerable beneficiary trusts. For ordinary trusts, the exemption threshold is £1,500.

What are the UK capital gains tax rates for 2025/26?

Capital gains tax rates for 2025/26 are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers across residential property, shares, crypto, and general assets. BADR qualifies for a 14% rate.

How much capital gains can be tax-free in the UK?

An individual can make up to £3,000 in net capital profits tax-free during the 2025/26 tax year using their Annual Exempt Amount. Married couples or civil partners sharing assets can realize up to £6,000 tax-free.

Do I pay capital gains tax if total income is under the personal allowance?

Yes, capital gains tax is due on net profits exceeding £3,000 even if your income is below £12,571. However, your low income keeps your basic rate tax band available, ensuring your gains are taxed at 18% rather than 24%.

How do I calculate capital gains tax on a property sale for 2025/26?

Subtract the original purchase price, acquisition fees, sale costs, and capital improvement costs from the sale proceeds. Deduct your £3,000 annual allowance, then multiply the remaining profit by 18% or 24% based on your income tax band.

Can unused capital gains tax allowance be carried forward to 2026/27?

No, the Annual Exempt Amount operates strictly on a use it or lose it basis per tax year. Unused portions of your £3,000 allowance expire at the end of the tax year on 5 April 2026.

How quickly must capital gains tax on property be paid to HMRC?

Capital Gains Tax owed on UK residential property sales must be reported to HMRC and paid in full within 60 calendar days of the completion date using the online UK Property tax service.

Disclaimer: This article is for informational purposes only and does not constitute formal financial, legal, or professional tax advice; consult a qualified UK accountant or tax advisor for personal guidance.