September 30, 2026
Capital Gains Tax (CGT) is not a tax on wealth. It is a tax on the profit you make when you sell, give away, or otherwise dispose of an asset that has gone up in value. That could be shares, a buy-to-let flat, a second home, or a valuable painting. It does not apply to your main home in most cases, and it does not apply to investments held in an ISA or pension. But if you have assets outside those shelters, CGT can quietly take a chunk of your gain. The good news is that there are several legitimate ways to reduce it.
What CGT actually covers
CGT applies to what HMRC calls “chargeable assets”. Common examples include:
- Shares and investment funds held outside an ISA or pension
- Buy-to-let property and second homes
- Business assets, including shares in a private company
- Personal possessions worth more than £6,000, such as art, jewellery or antiques, with some exceptions
- Cryptocurrency and other digital assets
Your main home is usually exempt thanks to Principal Private Residence Relief. Cars are exempt. So are UK government gilts and Premium Bonds. If you are unsure whether an asset is chargeable, check HMRC guidance or ask an accountant.
How the rates and annual allowance work
Everyone has an annual exempt amount, often called the CGT allowance. For the current tax year it is £3,000. You only pay CGT on gains above that figure. Gains are added to your income to work out which rate applies. In simple terms:
- Basic-rate taxpayer: 10% on most assets, 24% on residential property
- Higher or additional-rate taxpayer: 20% on most assets, 24% on residential property
The property rate changed in October 2024, so the lower property rate no longer exists. If your income plus gains pushes you into a higher band, part of your gain may be taxed at the higher rate. This is why timing and spreading gains can matter.
Example: you sell shares and make a £10,000 gain. After the £3,000 allowance, £7,000 is taxable. If you are a basic-rate taxpayer, the bill is £700. If you are a higher-rate taxpayer, it is £1,400. If the gain came from a buy-to-let property, the bill would be £1,680, assuming no other reliefs or losses.
Use your ISA and pension shelters
ISAs are the simplest CGT shelter. Any gains inside a stocks and shares ISA are free of UK income tax and CGT. You can put up to £20,000 into ISAs each tax year. If you are married or in a civil partnership, you each have your own allowance, so together you can shelter up to £40,000.
Pensions are also CGT-free. Investments held in a pension grow without CGT, though you pay income tax on withdrawals from most pensions. If you have a general investment account, consider using your ISA allowance first for new money. Moving existing investments into an ISA can trigger CGT, so calculate the gain before you act.
Transfer assets to your spouse or civil partner
Transfers between spouses and civil partners who live together are treated as “no gain, no loss”. That means you can pass assets to your partner without triggering CGT. They then own the asset and can use their own annual exempt amount and their own tax rate when they sell. This is one of the most effective legal ways to reduce a bill, especially if one of you pays tax at a lower rate.
Example: you plan to sell shares with a £20,000 gain. If you transfer half to your spouse before selling, you each have a £10,000 gain. After each person’s £3,000 allowance, you each pay tax on £7,000. If you are both basic-rate taxpayers, the total bill is £1,400 instead of £1,700. The saving grows if one of you is a higher-rate taxpayer and the other is not.
The transfer must be genuine. You cannot simply sell to your spouse and buy the asset back. Also remember that the asset becomes theirs, which has legal and practical implications.
Make the most of losses
If you sell an asset at a loss, you can use that loss to reduce your taxable gains. Losses must be claimed. You can offset losses against gains in the same tax year, and you can carry unused losses forward to future tax years. You cannot use losses to reduce your income tax bill.
Report losses to HMRC even if you do not need them this year. You generally have four years from the end of the tax year to claim them. If you have old losses from shares that went to zero, dig out the records. They could be worth money.
You can also choose which gains to offset first. In some cases, it is better to use losses against gains that would be taxed at the higher rate. An accountant can help you sequence this.
