What is Capital Gains Allowance?
The UK Capital Gains Allowance (annual exempt amount) is the tax-free slice of capital gains each individual can realise per tax year before CGT is due. For 2025/26 it is GBP 3,000 (down from GBP 12,300 in 2022/23). Gains above are taxed at 18% or 24% from October 2024.
Detailed definition
The Capital Gains Allowance (formally the annual exempt amount) lets individuals realise a small amount of capital gains each tax year without paying CGT. It applies to gains on shares, funds, second homes, and other capital assets - but only those held outside tax wrappers like ISAs or pensions, where all gains are already tax-free.
The allowance was dramatically cut by the Autumn Statement 2022 from GBP 12,300 (2022/23) to GBP 6,000 (2023/24) and again to GBP 3,000 from 6 April 2024. This GBP 9,300 reduction pulled hundreds of thousands more taxpayers into CGT each year, particularly investors with general investment accounts (GIAs) and second-home owners.
Spouses and civil partners can transfer assets between themselves on a no-gain no-loss basis. This is a standard planning technique to use both partners' GBP 3,000 allowances and to shift gains to whichever spouse is in a lower CGT band. Outside spouses, gifting other people the asset usually triggers CGT at the donor's level.
The 30-day same-share rule prevents the simplest form of "Bed and Breakfasting" - selling shares to crystallise a gain inside the allowance and immediately repurchasing them. If you buy back the same security within 30 days, HMRC matches the new purchase against the sale, undoing the crystallisation. The work-around is "Bed and ISA": sell in the GIA (using the GBP 3,000 allowance against the gain) and immediately repurchase inside your Stocks & Shares ISA. The ISA is a distinct legal owner, so the rule does not apply, and all future gains and dividends become permanently tax-free. With the allowance now at GBP 3,000, this is the single most important defensive move for unwrapped portfolios.
Capital losses are an underused tool. Any allowable loss realised in a tax year must first be set against gains in the same year (whether the gains exceed the GBP 3,000 allowance or not). If losses exceed gains for the year, the net amount carries forward indefinitely, provided you report it to HMRC within four years. Carried-forward losses are only deployed against the portion of future gains that exceeds the annual exempt amount, so they never "waste" the allowance. Many investors keep a simple losses register so they can deduct historic losses against an eventual large disposal years later.
Formula
Taxable Gain = Total Gains - Allowable Losses - Capital Gains Allowance
- Total Gains = Sum of all realised capital gains in the tax year (sale price minus base cost minus allowable expenses)
- Allowable Losses = Capital losses realised in the year, or carried forward from prior years
- Capital Gains Allowance = GBP 3,000 for individuals for 2025/26
Worked example
Suppose you sell shares for a GBP 8,000 gain in 2025/26 and you are a higher-rate (40%) UK taxpayer with no other capital losses.
- Total realised gain: GBP 8,000
- Capital Gains Allowance: GBP 3,000
- Taxable gain: GBP 8,000 - GBP 3,000 = GBP 5,000
- CGT rate (higher-rate on non-property assets, 24% from October 2024): 24%
- CGT due: GBP 5,000 x 24% = GBP 1,200
Related terms
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Frequently asked questions
What is the 2025/26 Capital Gains Allowance?
The 2025/26 annual exempt amount is GBP 3,000 for individuals and GBP 1,500 for trusts. This is the value of gains you can realise tax-free each tax year before CGT applies.
How has the CGT allowance changed?
The allowance was cut from GBP 12,300 (2022/23) to GBP 6,000 (2023/24) and then to GBP 3,000 from 6 April 2024 onward. Pre-2022 allowance rises tracked CPI; the new GBP 3,000 figure is frozen.
Does the CGT allowance apply to ISAs?
No. Gains inside an ISA or pension wrapper are exempt from CGT entirely, so the allowance is irrelevant for those holdings. It only matters for unwrapped (GIA) investments and personal-use assets.
Can I share my CGT allowance with my spouse?
Each spouse has their own GBP 3,000 allowance. You can not transfer the allowance itself, but you can transfer assets to your spouse on a no-gain no-loss basis before sale, effectively doubling the household exempt amount.
What is the UK CGT rate in 2025/26?
Non-property assets are taxed at 18% (basic rate) or 24% (higher/additional rate) from 30 October 2024. Residential property gains are taxed at the same 18% or 24% rates.
Can I carry forward unused CGT allowance?
No. The annual exempt amount is strictly 'use it or lose it' - any unused portion cannot be carried over to the next tax year. This is why disposals are often spread across April to use two years' allowances.
What is Bed and ISA?
Bed and ISA is the practice of selling shares in a General Investment Account (using the GBP 3,000 CGT allowance against the gain) and immediately repurchasing the same shares inside your Stocks & Shares ISA. The 30-day same-share rule is avoided because the ISA repurchase is a distinct legal owner. Future gains and dividends are then tax-free.