Capital Gains Tax Allowance Explained | Brookwood
What is the capital gains tax allowance
The capital gains tax allowance is £3,000 for the 2026/27 tax year. That is the amount of profit you can make from selling chargeable assets before you owe capital gains tax (CGT). But the figure stood at £12,300 only a few years ago, and that backstory matters. Most guides give you the current number and move on. They rarely explain how that steep reduction happened, or how the allowance interacts with your income tax band to determine your CGT rate.
Capital Gains Tax Allowance Explained
For 2026/27, HMRC lets you make £3,000 of capital gains before any tax is due. This is called the Annual Exempt Amount (AEA). Trustees of most settlements usually get half that, £1,500.
Think of it as a tax-free buffer. You only pay CGT on gains that exceed this amount. The allowance covers all your chargeable gains for the year in total. It is not applied per asset. It is one single £3,000 pot across everything you sell, gift, exchange, or otherwise dispose of.
Each person gets their own allowance. If you are married or in a civil partnership, you and your partner each have a separate £3,000 AEA. That gives a household up to £6,000 of tax-free gains per year.
One important rule: you cannot carry the allowance forward. Use it or lose it.
Quick example: You sell shares in 2026/27 for a £10,000 gain. Your £3,000 allowance applies automatically, leaving £7,000 as the taxable amount. The rate you pay on that £7,000 depends on your income band and the type of asset, something we will come to shortly.
How the Allowance Has Changed: The 2024 Reduction and Beyond
The current £3,000 allowance is dramatically lower than it was a few years ago. Here is the timeline:
2022/23 and earlier: The AEA was £12,300.
2023/24: Cut to £6,000 from 6 April 2023.
2024/25 onwards: Cut again to £3,000 from 6 April 2024.
Both reductions were announced in the Autumn Statement 2022. The policy was designed to broaden the CGT base and raise revenue. Industry analysis estimated the measure would raise roughly £1.6 billion by the end of the 2027/28 period.
Trustees saw a parallel reduction. Their AEA fell from £6,150 to £3,000 in 2023/24, and then to £1,500 from 2024/25 onwards.
The freeze at £3,000 also means fiscal drag is working quietly in the background. As asset prices rise with inflation, more people can breach the allowance each year, even without making especially large disposals. In real terms, the allowance shrinks further every year it stays frozen.
GOV.UK confirms the Capital Gains Tax tax-free allowance is currently £3,000 for individuals and £1,500 for trusts. Any future change would normally be announced at a Budget or Autumn Statement and then reflected on GOV.UK.
Where a couple could previously shelter up to £24,600 of gains a year between them, that figure is now just £6,000. That makes it far more important to think about timing, ownership, and spreading disposals across tax years before anything is sold.
What Assets Are Subject to Capital Gains Tax?
CGT can apply when you dispose of an asset that has increased in value, whether by sale, gift, exchange, or transfer. The main chargeable categories include:
Shares and investment funds held outside tax-efficient wrappers.
Buy-to-let and second residential properties.
Personal possessions worth £6,000 or more, excluding standard private cars.
Business assets such as land, equipment, and trademarks.
Cryptocurrency and foreign currency gains above the allowance.
Your main home, if you have let part of it out or used a section for business.
Investments held inside a Stocks and Shares ISA, Junior ISA, or Self-Invested Personal Pension (SIPP) do not attract CGT at all. Your primary residence is generally exempt under Private Residence Relief, provided you have not used it commercially or let it out in a way that affects the relief.
Capital Gains Tax Rates
A basic-rate taxpayer selling shares in 2026/27 pays 18% on gains above the £3,000 allowance. A higher-rate or additional-rate taxpayer pays 24%. Gains are stacked on top of your income for the year to work out which band they fall into.
For 2026/27, basic-rate taxpayers pay 18% on most assets including shares and funds, and 18% on residential property. Higher and additional-rate taxpayers pay 24% on most assets including shares and funds, and 24% on residential property.
The higher rate on residential property was separately reduced from 28% to 24% from 6 April 2024. The main CGT rates for most assets were later aligned at 18% and 24%.
If your gain straddles the basic-rate and higher-rate threshold, you pay 18% on the portion within the basic-rate band and 24% on the rest.
Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, applies an 18% CGT rate on qualifying business disposals from 6 April 2026. The lifetime limit on qualifying gains remains £1 million, and you generally need to have owned at least 5% of the business for a minimum of two years to qualify.
What Happens When You Exceed the Capital Gains Tax Allowance?
Once your total gains for the year pass £3,000, tax is owed on the excess. How you report depends on the asset type.
Residential property: You must report the gain to HMRC and pay the tax within 60 days of the completion date. Miss the deadline and you may face interest charges and penalties.
Other assets, including shares, funds, personal possessions, and crypto: These are usually reported and paid through Self Assessment. The deadline is 31 January following the end of the tax year, so gains in 2026/27 must usually be reported by 31 January 2028.
You may need to report even if no tax is due. From 2023/24 onwards, GOV.UK says that if you are already registered for Self Assessment, you must report your gains on your tax return if your total disposal proceeds for the tax year are more than £50,000, even where the gain itself is covered by allowances or losses. Before 2023/24, the reporting threshold was four times the Annual Exempt Amount.
The CGT allowance is entirely separate from the £12,570 personal income tax allowance. They serve different purposes, and you cannot use one to cover the other.
Using Capital Losses to Offset Capital Gains
Same-year losses are offset against gains automatically before the £3,000 allowance is applied. If your losses exceed your gains, the remaining losses can carry forward indefinitely to future tax years.
You must claim carry-forward losses within four years of the end of the tax year in which the loss occurred, and you need to report them to HMRC for them to be valid. For example, if you made a loss in 2026/27, you must report it to HMRC by 5 April 2031 to carry it forward.
ISAs and SIPPs: Sheltering investments inside a Stocks and Shares ISA or SIPP removes all future growth from CGT. To move existing holdings into an ISA, you need to sell them and rebuy within the ISA wrapper, a process known as Bed and ISA. The £20,000 annual ISA contribution limit caps how much you can shelter per year.
Spousal transfers: Transfers between spouses and civil partners usually happen at no gain/no loss. This effectively lets you use both partners’ £3,000 allowances, doubling the household total.
Pension contributions: Increasing your pension contributions can extend your basic-rate band, meaning more of your gains could be taxed at 18% instead of 24%.
Business reliefs: Business Asset Disposal Relief and Investors’ Relief can reduce rates on qualifying commercial disposals.
Talk to Brookwood Before You Sell
CGT planning is most effective before you dispose of an asset, not after. At Brookwood, we work with individuals and business owners across Oxfordshire on exactly this. If you are thinking about selling shares, property, or a business asset and want to understand the tax position before you make the decision, our specialist tax team can help
We can review the figures, explain what the gain means for your situation, and help you plan the disposal with the full picture in front of you.
