Ever wondered how much of your investment or property profit you can actually keep without the taxman taking a slice? For many UK residents, navigating Capital Gains Tax (CGT) can be a bit of a minefield.
Yet understanding your annual exemption can make a big difference in how much you retain after selling an asset.
With the UK government reducing allowances in recent years, and further changes now active for the 2025/26 tax year, individuals and investors need to know exactly what they’re dealing with.
Whether you’re selling shares, a second home, or parting ways with a valuable painting, being clued in on how Capital Gains Tax works, and how much of your gains are exempt, is more important than ever.
This blog will take a deep dive into the Capital Gains Tax Allowance 2025/26, how it works, what assets it applies to, who’s liable, and most importantly, how to keep as much of your profits as possible.
What is Capital Gains Tax Allowance?
Capital Gains Tax (CGT) is a tax charged on the profit made when you sell, transfer, or dispose of certain types of assets. The profit, not the total amount received, is what’s taxed.
But before any tax is calculated, every individual in the UK is entitled to a tax-free threshold called the Capital Gains Tax allowance.
This allowance is officially known as the Annual Exempt Amount (AEA). It’s the amount you can earn from gains before the CGT becomes payable.
CGT applies to:
- Property (excluding your main home)
- Shares and investments not held in ISAs or pensions
- Personal possessions worth over £6,000 (excluding your car)
- Business assets
In each tax year, if your total gains are below the allowance, you won’t pay CGT. It’s a crucial part of personal finance planning, especially for investors, landlords, and even collectors of high-value items.
Knowing your allowance helps with tax efficiency. Selling part of your asset portfolio this year and another part next year could mean using two allowances and significantly reducing your tax bill.
How Much is the Capital Gains Tax Allowance for 2025/26?
The Capital Gains Tax Allowance for 2025/26 is set at £3,000 for individuals and £1,500 for most trusts. This figure represents a further reduction compared to previous years.
For context:
- 2022/23: £12,300
- 2023/24: £6,000
- 2024/25: £3,000
- 2025/26: Still £3,000 (frozen)
The significant cut over recent years means many people who didn’t previously worry about CGT may now find themselves over the threshold.
If your total gains in a tax year exceed £3,000, you must report and potentially pay CGT. However, any gains below the threshold are entirely tax-free.
This is especially important for those selling assets like:
- Buy-to-let property
- Stocks and shares
- Valuable artwork or jewellery
Investors may want to consider spreading asset disposals across tax years or using tax wrappers like ISAs and pensions to shelter gains.
Who Needs to Pay Capital Gains Tax in the UK?
Not everyone in the UK pays Capital Gains Tax, but many might need to. Here’s a closer look at who is liable under HMRC’s 2025/26 rules.
Individuals and Sole Traders
Anyone selling assets not covered by exemptions, and making gains over £3,000 in a tax year, is liable for CGT. This includes selling:
- Second properties
- Company shares
- Valuable possessions
Trusts
Trusts pay CGT if they make gains above £1,500. They may also have to use a different tax rate depending on the beneficiary structure.
Business Owners
Business assets sold when retiring or restructuring may be subject to CGT. However, reliefs like Business Asset Disposal Relief may reduce the amount payable.
Foreign Residents
If you’re living abroad but selling a UK asset like property, you may still be liable for CGT. Special reporting rules apply here.
Couples
Each individual gets their own allowance. Spouses and civil partners can transfer assets between themselves without triggering CGT, effectively doubling the allowance to £6,000 if managed correctly.
What Types of Assets Are Subject to CGT?
Capital Gains Tax isn’t limited to just property or stocks. A wide range of assets fall within its scope if sold for a profit.
Assets That Typically Attract CGT
- Buy-to-let properties and second homes
- Shares not held in ISAs or pensions
- Business assets
- Personal possessions (called ‘chattels’) worth over £6,000
- Cryptocurrency
Exemptions from CGT
- Your main home (if it qualifies for Private Residence Relief)
- Gifts to a spouse or civil partner
- ISAs, Pensions, and NS&I Premium Bonds
- Gambling winnings and lottery prizes
- Cars (unless used for business or investment purposes)
Each of these asset types can trigger a tax event upon sale, so understanding their eligibility is crucial.
How Do Capital Gains Tax Rates Vary in 2025/26?
Once you’ve exceeded the £3,000 allowance, the rate at which you pay CGT depends on both your income tax band and the type of asset you’re selling.
For Property
- Basic rate taxpayers: 18%
- Higher or additional rate taxpayers: 24%
For Other Assets (e.g., Shares, Art, Crypto)
- Basic rate taxpayers: 10%
- Higher or additional rate taxpayers: 20%
The taxable portion of your gain is added to your income to determine your tax band, which then influences the rate applied.
Example
If you’re a basic rate taxpayer and sell shares making a gain of £8,000:
- Subtract the £3,000 allowance = £5,000 taxable
- If that £5,000 keeps your total income in the basic band, you’ll pay 10% CGT = £500
Capital Gains Tax Allowance 2025/26: How Does It Affect Property Sales?
Property is one of the most common assets subject to CGT, especially with the growing popularity of buy-to-let investing. The 2025/26 CGT allowance reduction is especially impactful here.
You are not taxed on the sale of your primary residence, thanks to Private Residence Relief. However, if you sell:
- A second home
- A rental property
- A holiday let
You may face significant CGT liability, especially if the gain exceeds £3,000.
Practical Example
- Sold a buy-to-let property for £300,000
- Original purchase price: £200,000
- Capital gain: £100,000
- Minus annual allowance: £3,000
- Taxable gain: £97,000
At 24% for a higher-rate taxpayer, that’s a £23,280 CGT bill.
What Happens If You Go Over the CGT Allowance?
Exceeding the CGT allowance means you’re liable to declare and potentially pay tax. HMRC requires you to report capital gains through:
- The self-assessment tax return
- The CGT on UK Property account (for property-related gains)
Reporting Timeline
- For UK property: within 60 days of the sale
- For other assets: by the self-assessment deadline (31 January following the tax year)
You Must
- Calculate total gains
- Deduct losses (if any)
- Apply allowance
- Calculate tax owed
- Report to HMRC
Failure to do so can lead to interest and penalties.
Can You Reduce or Avoid Capital Gains Tax?
Yes, and this is where smart tax planning makes a difference.
Strategies to Reduce CGT
- Use your allowance each year: Even if you don’t need the money now, realise some gains annually to use the tax-free threshold.
- Transfer assets to a spouse: Spouses can transfer assets tax-free. This can double the allowance and take advantage of a lower tax rate.
- Offset gains with losses: Capital losses in the same year or from previous years can reduce your taxable gain.
- Utilise ISAs and pensions: Investments held in ISAs or pensions grow free of CGT.
- Time your sales: Selling after the new tax year starts may give you another allowance to work with.
How to Report Capital Gains to HMRC in 2025/26?
Reporting CGT is now a digital-first process. The steps depend on the type of asset sold.
Property Sales
- Report within 60 days of completion
- Use the “Report and Pay Capital Gains Tax on UK property” online service
- Pay CGT directly through this platform
Other Assets
- Include gains in your Self Assessment tax return
- Submit by 31 January following the end of the tax year
You’ll need to keep records of:
- Purchase and sale prices
- Dates of transactions
- Costs incurred (legal fees, stamp duty, etc.)
HMRC may request evidence, so it’s essential to maintain documentation for at least five years.
What Future Changes Might Affect CGT Allowance Beyond 2025/26?
Though the CGT allowance remains at £3,000 for 2025/26, there is no guarantee it will stay at this level in future years. The allowance could be:
- Frozen further
- Reduced
- Restructured entirely under a future government
There is also speculation around aligning CGT rates with income tax bands, which could increase tax bills for higher earners significantly.
Investors should:
- Monitor the Budget
- Use tax wrappers like ISAs
- Take advice to prepare for policy shifts
Capital Gains Tax Allowance Summary for 2025/26
| Category | Amount / Rate |
| Individual Allowance | £3,000 |
| Trust Allowance | £1,500 |
| Property CGT Rate (Basic) | 18% |
| Property CGT Rate (Higher) | 24% |
| Other Assets CGT (Basic) | 10% |
| Other Assets CGT (Higher) | 20% |
| Reporting Deadline (Property) | 60 days |
| Reporting Deadline (Other) | 31 January (via SA) |
The good news is, individuals are entitled to a capital gains tax allowance each tax year, which allows you to keep a set amount to yourself without having to pay any tax on it.
For the current tax year (2025/26), the CGT allowance is £3,000. So no matter how much your gains are, up to £3,000 of it is tax-exempt and yours to enjoy as pure profit.
CGT is only applicable to gains exceeding £3,000, and you’ll be liable to pay tax on gains when it exceeds this amount.
Conclusion
Capital Gains Tax can seem like a complex subject, but by understanding the rules, rates, and allowances for 2025/26, you can take full advantage of what’s legally yours.
The £3,000 exemption might seem small, but used wisely, especially with a spouse or in combination with other tax reliefs, it can make a noticeable difference.
As the government continues to review tax policies, being proactive rather than reactive is the best way to stay ahead. Whether you’re planning to sell a property, cash out on shares, or even liquidate a collection, understanding your CGT position is vital.
Frequently Asked Questions
What’s the difference between income tax and capital gains tax?
Income tax is charged on your earnings from work, interest or rent, while CGT is charged on the profit made from selling assets.
Is the CGT allowance available for couples individually or jointly?
Each person gets their own £3,000 CGT allowance, so couples can use up to £6,000 combined if structured properly.
Do I need to report CGT if I don’t exceed the allowance?
No, if your total gains are below £3,000 in a tax year, you don’t need to report them to HMRC.
How is CGT calculated on jointly owned assets?
The gain is usually split equally between the owners, and each uses their own CGT allowance.
Is there a separate allowance for property gains?
No, the same £3,000 CGT allowance applies to all chargeable gains, including property.
Can I carry forward unused CGT allowance?
No, CGT allowances cannot be carried forward. They must be used in the same tax year.
Are cryptocurrency gains taxed under CGT in the UK?
Yes, profits from selling crypto are subject to CGT if they exceed the annual exemption.
