United Kingdom Capital Gains Tax Deductions and Allowances for 2025/2026: The Complete Guide

If you've sold property, shares, or other valuable assets in the United Kingdom, understanding the capital gains tax (CGT) deductions and allowances for 2025/2026 is essential to minimising your tax bill. The 2025/2026 tax year—running from 6 April 2025 to 5 April 2026—brings continued reductions to the annual exempt amount, making it more important than ever to claim every United Kingdom tax deduction and relief you're entitled to.

In this guide, we'll walk you through the capital gains tax allowances in the United Kingdom, the deductions you can claim, the reliefs available, and practical strategies to keep your CGT liability as low as legally possible. Whether you're a UK resident, a non-resident with UK property, or an expat navigating the system, this article has you covered.

What Is Capital Gains Tax in the United Kingdom?

Capital Gains Tax (CGT) is a tax on the profit (or "gain") you make when you sell, give away, or otherwise dispose of an asset that has increased in value. It is not a tax on the total amount you receive—only on the gain itself.

CGT applies to a wide range of assets, including:

Residential and commercial property (excluding your main home in most cases)
Shares and investments not held in an ISA or pension
Business assets, including goodwill and intellectual property
Personal possessions worth more than £6,000 (excluding cars)
Cryptocurrency such as Bitcoin, Ethereum, and other digital assets

Certain disposals are exempt from CGT, such as the sale of your principal private residence (subject to conditions), assets held within ISAs, UK government gilts, and gains on death.

CGT Rates for 2025/2026

The rates you pay depend on your total taxable income and the type of asset disposed of:

Asset Type	Basic Rate Taxpayer	Higher/Additional Rate Taxpayer
Residential property	18%	24%
Other assets (shares, crypto, etc.)	10%	20%
Business Asset Disposal Relief (qualifying)	14% (rising to 18% from April 2026)	14%
Investors' Relief (qualifying)	14% (rising to 18% from April 2026)	14%

To quickly estimate how much you might owe, use our United Kingdom Capital Gains Tax Calculator.

The Annual Exempt Amount (AEA) for 2025/2026

The annual exempt amount is the single most important capital gains tax allowance in the United Kingdom. It is the amount of capital gains you can realise each tax year before any CGT becomes payable.

2025/2026 Annual Exempt Amount

Individuals: £3,000
Trustees: £1,500

This represents a significant reduction from previous years. For context, the AEA was £12,300 as recently as the 2022/2023 tax year, dropped to £6,000 in 2023/2024, then to £3,000 from 2024/2025 onwards. The government has frozen it at £3,000 for 2025/2026.

Key Points About the AEA

The AEA is a "use it or lose it" allowance—you cannot carry unused portions to future tax years.
Each individual has their own AEA, so couples who jointly own an asset can potentially use two allowances (£6,000 combined).
The AEA is applied after deducting allowable costs and any applicable losses.

Example: Sarah sells shares in 2025/2026 and makes a gain of £8,000 after deducting costs. She deducts her £3,000 AEA, leaving a taxable gain of £5,000. If she's a basic rate taxpayer and the gain doesn't push her into the higher rate band, she pays 10% on £5,000 = £500.

Allowable Deductions That Reduce Your Gain

Before your annual exempt amount is applied, you can deduct various allowable costs from the sale proceeds to reduce the chargeable gain. Getting these deductions right is one of the most effective forms of United Kingdom tax relief.

Acquisition Costs

The original purchase price of the asset, including:

The price you paid for the asset
Stamp Duty Land Tax (SDLT) or Stamp Duty paid on purchase
Legal and conveyancing fees on purchase
Estate agent or broker fees paid when acquiring the asset

Enhancement Expenditure

Money spent on improving the asset (not maintenance or repairs), such as:

Building an extension on a property
Renovating to add permanent value (e.g., a new kitchen that adds to the property's value)
Professional fees directly related to the improvement (architect fees, planning application costs)

Important: Normal maintenance and repair costs are not deductible. The expenditure must be reflected in the state or nature of the asset at the time of disposal.

Disposal Costs

Costs incurred in selling or disposing of the asset, including:

Estate agent or broker commissions
Legal and conveyancing fees on sale
Advertising costs to find a buyer
Valuation fees required for the disposal

Costs of Defending or Establishing Title

If you incurred legal costs to defend or establish your ownership of the asset, these may also be deductible.

Practical Example:

James bought a buy-to-let property in 2015 for £200,000, paying £1,500 in legal fees and £3,000 in SDLT. He spent £25,000 on a loft conversion in 2019. He sells the property in October 2025 for £310,000, paying £4,500 in estate agent fees and £1,200 in legal fees.

Item	Amount
Sale proceeds	£310,000
Less: Purchase price	(£200,000)
Less: Purchase costs (legal + SDLT)	(£4,500)
Less: Enhancement (loft conversion)	(£25,000)
Less: Disposal costs (agent + legal)	(£5,700)
Chargeable gain before AEA	£74,800
Less: Annual Exempt Amount	(£3,000)
Taxable gain	£71,800

The tax owed will depend on James's income tax band. You can work through scenarios like this using our United Kingdom Capital Gains Tax Calculator.

Key Capital Gains Tax Reliefs for 2025/2026

Beyond the annual exempt amount and allowable deductions, HMRC offers several important reliefs that can substantially reduce or even eliminate your CGT liability. These are crucial components of United Kingdom tax relief for capital gains.

Private Residence Relief (PRR)

If you sell a property that has been your only or main residence throughout your period of ownership, the entire gain is exempt from CGT. This is the most valuable CGT relief for most individuals.

Key conditions and considerations:

The property must have been your main home for the entire ownership period (with some permitted absences)
The last 9 months of ownership are automatically exempt, even if you've moved out
If you let part of your home, Lettings Relief may apply (up to £40,000 per person), but only if you shared occupation with the tenant
If the property has a large garden (over 0.5 hectares), the excess land may not qualify
Periods of deemed occupation (e.g., up to 4 years working elsewhere in the UK, any period working abroad) can extend the relief

Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs' Relief, BADR allows qualifying business owners to pay a reduced CGT rate on up to £1 million of lifetime qualifying gains.

For 2025/2026, the BADR rate is 14% (increasing to 18% from April 2026).

To qualify, you must meet the following conditions for at least two years before the disposal:

You are a sole trader or business partner disposing of all or part of the business, or
You are disposing of shares in a trading company where you hold at least 5% of shares and voting rights and are an officer or employee of the company
The business must be a genuine trading business (not primarily investment activities)

Example: Emma sells her small consultancy business in August 2025, making a gain of £500,000 after allowable deductions. She qualifies for BADR and pays 14% CGT on the gain = £70,000 (compared to £100,000 at the standard 20% rate, saving her £30,000).

Investors' Relief

This relief is available for gains on qualifying shares in unlisted trading companies, subject to a £10 million lifetime limit. The shares must have been:

Newly issued on or after 17 March 2016
Held for at least 3 years from 6 April 2016
In a qualifying trading company
The investor must not be an employee or officer of the company (with limited exceptions)

For 2025/2026, the Investors' Relief rate is also 14%, aligning with BADR.

Rollover Relief

If you sell a qualifying business asset and reinvest the proceeds in a new qualifying business asset within a specified period (one year before or three years after the disposal), you can defer the gain. The gain is effectively "rolled over" into the new asset, reducing its base cost.

Qualifying assets include land and buildings used for business, fixed plant and machinery, and goodwill (with restrictions for companies).

Gift Hold-Over Relief

When you give away a business asset or shares in an unlisted company (or listed shares qualifying under certain conditions), both the donor and recipient can jointly elect to "hold over" the gain. The recipient takes on the asset at a reduced base cost, deferring the CGT until they eventually sell it.

This relief is commonly used in:

Family business succession planning
Gifts of assets to trusts
Transfers of qualifying shares

EIS and SEIS Deferral Relief

Investing in qualifying shares under the Enterprise Investment Scheme (EIS) allows you to defer a capital gain made on any asset if the proceeds are reinvested within a qualifying timeframe. The Seed Enterprise Investment Scheme (SEIS) offers a CGT exemption on gains reinvested (up to limits) rather than just a deferral.

How to Use Losses to Reduce Your CGT Bill

Capital losses are a powerful and often overlooked United Kingdom tax deduction for CGT purposes.

How Capital Losses Work

If you sell an asset for less than you paid for it (after allowable costs), you have a capital loss.
Capital losses in the same tax year are automatically offset against gains before the AEA is applied.
If your losses exceed your gains, the excess can be carried forward indefinitely and used against future gains.
Losses from previous years are used only to the extent needed to bring the net gain down to the AEA (i.e., you don't waste your annual exempt amount by applying too many brought-forward losses).

Reporting Losses

To use losses, they must be reported to HMRC:

Current year losses are automatically included in your Self Assessment return.
Losses to carry forward must be claimed within 4 years of the end of the tax year in which they arose.

Common Mistake: Many taxpayers fail to report losses in years when they have no gains, thinking there's no point. This means they lose the ability to carry those losses forward. Always report your losses.

Bed and Breakfasting Rules

Historically, investors could sell shares to crystallise a loss and repurchase them the next day. HMRC's 30-day rule ("bed and breakfasting rule") now prevents this: if you sell shares and repurchase the same shares within 30 days, the sale is matched with the repurchase, negating the loss.

Alternatives include:

Waiting more than 30 days before repurchasing
Your spouse or civil partner purchasing the shares instead (though be aware of HMRC's general anti-avoidance rules)
Purchasing shares in a similar but different company or fund
Buying the shares within an ISA wrapper during the 30-day period (the "Bed and ISA" strategy)

Strategies to Minimise Capital Gains Tax in 2025/2026

With the annual exempt amount at just £3,000, proactive CGT planning has never been more important. Here are practical strategies for United Kingdom tax relief on capital gains:

1. Use Your Annual Exempt Amount Every Year

Consider selling some assets each tax year to utilise your £3,000 allowance rather than making a large disposal in a single year.

2. Transfer Assets Between Spouses or Civil Partners

Transfers between married couples and civil partners are CGT-free. This allows you to:

Use both partners' annual exempt amounts (£6,000 combined)
Shift the gain to the partner in a lower income tax band, potentially accessing the 10% rate rather than 20%

Note: From 6 April 2023, new rules restrict the timeframe for spousal transfers where the couple has separated.

3. Maximise ISA and Pension Contributions

Assets held within ISAs and pensions are exempt from CGT. Consider the "Bed and ISA" strategy: sell investments in a taxable account, crystallise gains within your AEA, and repurchase within your ISA.

For 2025/2026, the ISA allowance remains at £20,000 per person.

4. Time Your Disposals

If you're close to the end of the tax year, consider whether it's better to delay a sale until after 5 April to use the following year's AEA.

5. Claim All Allowable Costs

Keep meticulous records of purchase costs, improvement expenditure, and disposal costs. Many taxpayers overpay CGT simply because they don't claim all deductions they're entitled to.

6. Consider Charitable Donations

If you donate an asset to a registered charity, the disposal is exempt from CGT. You may also be able to claim Income Tax relief on the market value of the asset donated. Check how this interacts with your income tax position using our United Kingdom Income Tax Calculator.

CGT Reporting Deadlines and Payment for 2025/2026

Understanding when and how to report and pay CGT is essential to avoiding penalties.

UK Residential Property Disposals

If you sell a UK residential property that is not your main home (and the gain is not fully covered by reliefs), you must:

Report the disposal to HMRC within 60 days of completion
Pay the estimated CGT within the same 60-day window
This is done through HMRC's online CGT on UK property service
You'll still need to include the disposal on your Self Assessment tax return, where any overpayment will be refunded or underpayment collected

Other Asset Disposals

For disposals of shares, crypto, and other non-property assets:

Report the gain on your Self Assessment tax return for the 2025/2026 tax year
The filing deadline is 31 January 2027 (online filing)
Payment is due by 31 January 2027

Non-Residents

Non-UK residents are subject to CGT on disposals of:

UK residential property (since April 2015)
UK commercial property and land (since April 2019)
Certain UK property-rich entities

Non-residents must report and pay within the 60-day window, regardless of asset type. If you're a non-resident, it's also worth checking whether a double taxation agreement (DTA) between the UK and your country of residence provides relief. The UK has over 130 DTAs in force, many of which allocate taxing rights on capital gains or provide mechanisms to prevent double taxation.

Frequently Asked Questions

Do I pay CGT on inherited assets?

No CGT is payable on assets acquired through inheritance at the time you inherit them. The asset's base cost is its market value at the date of death. However, if you later sell the asset for more than this value, you'll pay CGT on the gain from that point.

Can I offset capital losses against income?

Generally, no. Capital losses can only be offset against capital gains, not against income. However, there are limited exceptions, such as losses on qualifying shares in trading companies under Section 131 ITA 2007, which can sometimes be set against income.

Is cryptocurrency subject to CGT?

Yes. HMRC treats cryptocurrency as a taxable asset. Disposing of crypto—including selling, swapping one token for another, spending, or gifting—is a taxable event. The same rates, allowances, and deductions apply as for other non-property assets.

What happens if I don't report a gain?

Failure to report can result in:

Penalties of up to 200% of the tax owed for deliberate non-disclosure
Interest on late payments
HMRC has up to 20 years to assess underpaid tax in cases of deliberate non-compliance

Conclusion: Key Takeaways for 2025/2026

The 2025/2026 tax year presents a challenging landscape for capital gains tax in the United Kingdom, with the annual exempt amount frozen at just £3,000. Here are your key action points:

Claim every allowable deduction: Purchase costs, improvement costs, and disposal costs all reduce your taxable gain.
Use your AEA strategically: Don't let your £3,000 annual exempt amount go to waste—consider staggering disposals across tax years.
Report and claim losses: Even in years with no gains, reporting losses preserves your right to carry them forward.
Explore reliefs: Private Residence Relief, Business Asset Disposal Relief, Rollover Relief, and others can dramatically reduce your liability.
Plan with your spouse: Spousal transfers can double your allowances and optimise your tax band usage.
Meet deadlines: The 60-day reporting rule for UK property disposals carries penalties if missed.

Use our United Kingdom Capital Gains Tax Calculator to model your specific situation and estimate your 2025/2026 liability. You may also want to check your overall tax position with our United Kingdom Income Tax Calculator, as your income tax band directly affects your CGT rate.

This article is for informational purposes only and does not constitute tax advice. Tax laws change frequently; consult a qualified tax professional for advice specific to your situation.