Capital Gains Tax 2026/27: Rates, Allowances and How to Reduce Your Bill

Capital Gains Tax 2026/27: The Complete Guide

Capital Gains Tax (CGT) is charged on profits made when you dispose of certain assets — selling shares, selling a second property, gifting investments, or closing a business. In 2026/27, following the October 2024 Budget changes that aligned most CGT rates more closely with income tax, understanding CGT is more important than ever for investors, property owners, and business owners.

CGT Rates 2026/27

Whether basic or higher rate applies depends on your total taxable income for the year including the gain. If the gain fills your remaining basic rate band, part may be at 18% and part at 24%.

Annual Exempt Amount 2026/27

£3,000 per person per tax year — the first £3,000 of net gains is completely CGT-free.

This has fallen dramatically: it was £12,300 in 2022/23. Each individual has their own allowance — married couples can use both, potentially sheltering £6,000/year in gains.

What Triggers CGT

Disposals that trigger CGT:

• Selling shares or funds outside an ISA
• Selling a second property, buy-to-let, or holiday let
• Gifting assets (treated as a disposal at market value)
• Receiving insurance proceeds on an asset
• Certain business disposals

Disposals that do NOT trigger CGT:

• Selling your main home (Principal Private Residence relief)
• All ISA investments — completely CGT-free
• Pension investments — completely CGT-free
• UK government bonds (gilts)
• Cars (personal use)
• Premium Bonds, lottery winnings
• Transfers between spouses/civil partners (no CGT between them)
• First £3,000 of annual gains (annual exempt amount)

Worked Examples

Example 1: Share sale by higher rate taxpayer

• Bought 1,000 shares at £5 = £5,000
• Sold at £12 = £12,000
• Gain: £7,000
• Less annual exempt amount: −£3,000
• Taxable gain: £4,000
• CGT at 24%: £960

Example 2: Buy-to-let sale by higher rate taxpayer

• Bought for £180,000 (including £5,000 SDLT + £2,000 fees)
• Sold for £320,000 (net after £8,000 agent fees)
• Capital improvements during ownership: £15,000
• Gross gain: £320,000 − £185,000 = £135,000
• Less improvements: −£15,000
• Less selling costs: already deducted
• Less annual exempt amount: −£3,000
• Taxable gain: £117,000
• CGT at 24%: £28,080

Legal Ways to Reduce CGT

1. Use Your Annual Exempt Amount Every Year Don't let it go to waste. Sell assets with gains up to £3,000 annually (even to immediately re-buy — "bed and ISA" or "bed and SIPP") to reset the base cost.

2. Transfer to Your Spouse/Civil Partner First Assets transferred between spouses and civil partners are CGT-free. If your partner is a basic rate taxpayer, transferring half a shareholding before sale means their half is taxed at 18% not 24%. You both get the £3,000 annual exempt amount — potentially saving £2,520 on a significant disposal.

3. Invest Through an ISA ISA gains are permanently CGT-free. Move regular investments into ISA wrapper via "bed and ISA" (sell outside ISA, rebuy inside). You use your ISA allowance but gains on rebought investments are tax-free going forward.

4. Use a Pension (SIPP) for Investments Pension gains are CGT-free. Direct pension contributions also reduce income tax, potentially keeping you in the basic rate band for gains.

5. Time Disposals Across Tax Years Splitting a large disposal across two tax years uses two annual exempt amounts (£6,000 combined). If completing a sale in April vs March makes a meaningful difference, the timing is worth considering.

6. Business Asset Disposal Relief (BADR) Qualifying business disposals — selling your company, shares in qualifying trading company, or certain business assets — attract a reduced 18% rate from 6 April 2026. Must meet qualifying conditions including 5% shareholding and 2-year holding period.

7. Loss Relief Capital losses are offset against gains in the same tax year. If you have unrealised losses, crystallising them in the same year as a gain can reduce the net taxable amount. Losses can also carry forward indefinitely against future gains.

Reporting CGT

Property sales: Must be reported to HMRC and tax paid within 60 days of completion via the UK Property Reporting Service. This is a firm deadline — late penalties apply immediately.

Other assets: Report via Self Assessment by 31 January after the tax year ends. Payments on account may apply if you have large prior year gains.

No need to report if: Total proceeds in the year are under £50,000 AND net gains are under the annual exempt amount (£3,000).

Business Asset Disposal Relief (BADR)

BADR applies to qualifying business disposals, taxing gains at a flat 18% regardless of income level.

Qualifying for BADR:

• Selling all or part of your trading business (sole trader or partner)
• Selling shares in a personal company: must own 5%+ of shares and voting rights, must be employee or officer, company must be a trading company
• Selling qualifying business assets used in the business

Lifetime limit: £1,000,000 of qualifying gains at the 18% rate.

Frequently Asked Questions

Q: I inherited shares — what is my CGT base cost? For inherited assets, your base cost is the market value at the date of death. The deceased person's gain up to death is not crystallised for CGT purposes (though IHT may apply). Any subsequent gain from the date of death to your sale is taxable.

Q: I made a loss on cryptocurrency — can I use it? Yes — crypto is a capital asset, and losses on disposal can be set against other capital gains in the same year, or carried forward against future crypto or other gains. You must report both gains and losses to HMRC even if the net position means no tax is due.

Q: What is "bed and ISA"? Selling investments outside an ISA and immediately rebuying the same investments inside an ISA. The sale triggers a CGT event (hopefully sheltered by annual exempt amount), but the rebought investments are now in the ISA wrapper and all future gains are permanently tax-free. There is no "30-day rule" for bed-and-ISA (unlike bed-and-breakfast).

Q: Do I pay CGT on gifts to my children? Yes — gifts are treated as a disposal at market value for CGT purposes. However, Principal Private Residence relief applies to your main home, and gifts below the annual exempt amount are tax-free.