If you're selling assets in the United Kingdom in the 2025/2026 tax year, understanding the full range of United Kingdom tax deductions 2025/2026 and capital gains tax allowances United Kingdom offers is essential to keeping your tax bill as low as legally possible. Capital Gains Tax (CGT) applies when you dispose of an asset that has increased in value, but the UK tax system provides a variety of deductions, reliefs, and allowances that can significantly reduce — or even eliminate — the amount you owe.

This guide walks you through every major deduction and allowance available for the 2025/2026 tax year (6 April 2025 to 5 April 2026), with practical examples and actionable tips. Whether you're a UK resident selling a buy-to-let property, an investor disposing of shares, or a non-resident with UK assets, you'll find the information you need here.

What Is Capital Gains Tax in the United Kingdom?

Capital Gains Tax is a tax on the profit (the "gain") you make when you sell or dispose of an asset that has increased in value. It is not a tax on the total amount you receive — only the gain itself is taxable. Disposals that trigger CGT include selling an asset, giving it away, swapping it, or receiving compensation for it (such as an insurance payout).

Not all assets are subject to CGT. Key exemptions include:

  • Your main home (under Private Residence Relief — see below)
  • ISA and SIPP investments
  • UK Government gilts and premium bonds
  • Personal cars
  • Personal possessions ("chattels") sold for £6,000 or less
  • Gains covered by your Annual Exempt Amount

For assets that are subject to CGT, the rates for 2025/2026 are:

Taxpayer Status Standard Rate (Most Assets) Rate on Residential Property
Basic rate taxpayer 18% 18%
Higher/additional rate taxpayer 24% 24%

Note that from 30 October 2024, the lower rate for non-residential assets was raised from 10% to 18%, and the higher rate from 20% to 24%, aligning all CGT rates. These rates apply throughout the 2025/2026 tax year.

You can quickly estimate your liability using 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

Individual/Trust Annual Exempt Amount
Individuals £3,000
Most trusts £1,500

This allowance has been significantly reduced in recent years. For context:

  • 2022/2023: £12,300
  • 2023/2024: £6,000
  • 2024/2025: £3,000
  • 2025/2026: £3,000

The AEA is frozen at £3,000 and is expected to remain at this level for the foreseeable future. This means more taxpayers than ever will find themselves liable for CGT.

Key Rules About the AEA

  • Use it or lose it: The AEA cannot be carried forward to future tax years. If you don't use it in 2025/2026, it's gone.
  • Per person: Each individual has their own AEA. Married couples and civil partners each get their own £3,000 allowance.
  • Cannot create a loss: The AEA can reduce a gain to zero but cannot create an allowable loss.

Practical example: Sarah sells shares in July 2025 and realises a gain of £8,000. After deducting her £3,000 AEA, her taxable gain is £5,000. If she is a basic rate taxpayer, she pays 18% on £5,000 = £900 in CGT.

Allowable Deductions: Reducing Your Gain Before Tax

Before applying the AEA or any reliefs, you first calculate your gain by deducting certain allowable costs from the disposal proceeds. These United Kingdom tax deductions 2025/2026 directly reduce the gain on which CGT is calculated.

What Counts as an Allowable Deduction?

  1. Original purchase price (acquisition cost): The amount you originally paid for the asset.
  2. Incidental costs of purchase: Legal fees, stamp duty, surveyor fees, and estate agent fees paid when acquiring the asset.
  3. Incidental costs of sale: Legal fees, estate agent commissions, and advertising costs incurred when selling the asset.
  4. Improvement costs: Money spent on enhancing the asset (not maintenance or repairs), provided the enhancement is still reflected in the asset at the time of disposal. For property, this might include extensions, loft conversions, or new kitchens.
  5. Costs of establishing or defending title: Legal costs incurred to establish, preserve, or defend your ownership rights.

What You Cannot Deduct

  • Normal maintenance and repair costs
  • Insurance premiums
  • Interest on loans taken out to buy the asset
  • Any costs already claimed as a deduction against income tax

Practical example: James bought a buy-to-let flat in 2015 for £200,000. He paid £3,000 in legal fees and £2,000 in stamp duty at purchase. He spent £25,000 on an extension in 2018. He sells the flat in 2025 for £320,000, paying £5,000 in estate agent fees and £1,500 in legal fees on sale.

Item Amount
Sale proceeds £320,000
Less: Purchase price (£200,000)
Less: Purchase costs (£5,000)
Less: Improvement costs (£25,000)
Less: Sale costs (£6,500)
Gain before reliefs £83,500

James can then apply the £3,000 AEA to reduce the taxable gain to £80,500.

Key Capital Gains Tax Reliefs for 2025/2026

Beyond the AEA and allowable deductions, HMRC provides several significant reliefs that can substantially reduce or defer CGT. Understanding these United Kingdom tax relief provisions is crucial for effective tax planning.

Private Residence Relief (PRR)

If you sell your main home, you are generally exempt from CGT entirely under Private Residence Relief. This is the most valuable CGT relief for most UK taxpayers.

To qualify:

  • The property must have been your only or main residence throughout ownership
  • You must not have used it exclusively for business purposes
  • The grounds must not exceed 5,000 square metres (including the building)

Partial relief applies if:

  • You lived in the property for only part of the ownership period
  • You let out part of the property
  • You used part exclusively for business

The final 9 months of ownership always qualify for PRR, even if you have moved out (provided the property was your main residence at some point).

Lettings Relief

Lettings Relief is available when you sell a property that was at some point both your main home and let out to tenants. From April 2020, this relief only applies if you were in shared occupancy with the tenant — meaning you and the tenant both lived in the property at the same time.

The relief is capped at the lower of:

  • £40,000
  • The amount of PRR available
  • The gain attributable to the letting period

Business Asset Disposal Relief (BADR) — Formerly Entrepreneurs' Relief

Business Asset Disposal Relief allows qualifying business owners to pay a reduced CGT rate on eligible gains.

For 2025/2026:

  • The BADR rate is 14% (increased from 10% on 6 April 2025)
  • The lifetime limit remains £1 million of qualifying gains
  • From April 2026, the rate is expected to increase further to 18%

To qualify, you must typically:

  • Be selling all or part of a trading business you have owned for at least 2 years
  • Be selling shares in a trading company where you hold at least 5% of shares and voting rights and have been a working officer or employee for at least 2 years

Example: Emma sells her small business in September 2025 for a gain of £500,000. With BADR, she pays 14% = £70,000 instead of 24% = £120,000. That's a saving of £50,000.

Investors' Relief

Investors' Relief is available on gains from the disposal of qualifying shares in unlisted trading companies. For 2025/2026, the rate is 14%, with a separate lifetime limit of £10 million.

The shares must have been:

  • Subscribed for (not purchased on the secondary market) on or after 17 March 2016
  • Held for at least 3 years
  • In an unlisted trading company

Rollover Relief

If you sell a qualifying business asset and reinvest the proceeds into a new qualifying business asset, you can defer the gain under Rollover Relief. The gain is "rolled over" into the cost of the new asset, reducing the base cost and deferring CGT until the replacement asset is eventually sold.

Qualifying assets include land and buildings, 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 trading company (or make a disposal that is a chargeable transfer for Inheritance Tax purposes), you and the recipient can jointly elect for Gift Hold-Over Relief. This defers the gain to the recipient, who takes on the asset at a reduced base cost.

EIS and SEIS Deferral Relief

Investing in qualifying Enterprise Investment Scheme (EIS) companies allows you to defer CGT on gains realised from any asset, provided the investment is made within 1 year before or 3 years after the gain arose. Seed Enterprise Investment Scheme (SEIS) investments can also provide CGT exemptions on up to 50% of the gain reinvested.

Losses: How to Offset Capital Losses Against Gains

Capital losses are a powerful and often overlooked form of United Kingdom tax relief. If you sell an asset at a loss, that loss can be used to reduce your taxable gains.

How Capital Losses Work

  1. Current year losses must be set against gains in the same tax year first. Unlike the AEA, they must be used even if they reduce gains below the AEA threshold.
  2. Carried-forward losses from previous years can be used after current year losses. These are more flexible — you only need to use enough to reduce your gains to the AEA level.
  3. Losses must be reported to HMRC within 4 years of the end of the tax year in which they arose, or they may be lost.

Negligible Value Claims

If you hold an asset that has become almost worthless (such as shares in a company that has gone into liquidation), you can make a negligible value claim. This treats the asset as if you had sold and immediately reacquired it at its current negligible value, crystallising a loss you can set against gains.

Tip: Review your portfolio regularly. Realising losses on underperforming investments before 5 April 2026 can offset gains made elsewhere in the 2025/2026 tax year.

Capital Gains Tax for Non-Residents

Non-residents of the United Kingdom are subject to CGT on:

  • UK residential property (since April 2015)
  • UK commercial property and land (since April 2019)
  • Shares deriving 75%+ of their value from UK land (since April 2019)

Non-residents benefit from the same £3,000 AEA for 2025/2026 and can claim the same allowable deductions and many of the same reliefs.

Double Taxation Agreements

The UK has an extensive network of double taxation agreements (DTAs) with over 130 countries. These treaties typically determine which country has the right to tax a capital gain and provide mechanisms for relief from double taxation.

If you are a resident of a country with a DTA with the UK, you may be able to:

  • Claim a tax credit in your country of residence for CGT paid in the UK
  • Be exempt from UK CGT on certain types of asset under the specific treaty provisions

Non-residents disposing of UK property must report the disposal to HMRC within 60 days of completion, even if no tax is due.

Use our United Kingdom Capital Gains Tax Calculator to estimate your liability as a non-resident.

Tax Planning Strategies to Minimise CGT in 2025/2026

With the AEA now at just £3,000, proactive tax planning is more important than ever. Here are practical, legitimate strategies to reduce your CGT liability.

1. Use Both Spouses' Annual Exempt Amounts

Transfers between spouses and civil partners are CGT-free. By transferring assets to your partner before sale, you can use both £3,000 AEAs — sheltering up to £6,000 of gains. This can save up to £1,440 in CGT for higher rate taxpayers.

2. Stagger Disposals Across Tax Years

If possible, spread asset sales across two or more tax years to use the AEA multiple times. Selling some shares before 5 April 2026 and some after means you can use both the 2025/2026 and 2026/2027 AEAs.

3. Harvest Losses Before Year-End

Review your portfolio before 5 April 2026. Selling loss-making investments ("tax-loss harvesting") creates allowable losses that offset gains. Be aware of the "bed and breakfasting" rules — if you sell and repurchase the same shares within 30 days, the loss is denied.

Workaround: You can repurchase similar (but not identical) investments, or your spouse can buy the same shares, or you can repurchase within an ISA.

4. Maximise ISA and Pension Contributions

Gains within ISAs and SIPPs are completely exempt from CGT. For 2025/2026, the ISA allowance is £20,000. Moving investments into ISAs (a strategy called "Bed and ISA") crystallises a gain now but protects all future growth from CGT.

5. Claim All Allowable Costs

Many taxpayers forget to deduct all legitimate costs. Keep records of every expense related to acquisition, improvement, and disposal. Even modest legal fees and stamp duty add up.

6. Consider the Timing of Your Income

Your CGT rate depends on your total taxable income. If your income is near the basic rate threshold (£50,270 for 2025/2026), consider whether timing the disposal to a year when your income is lower could mean some or all of the gain falls into the basic rate band.

Use our United Kingdom Income Tax Calculator alongside the United Kingdom Capital Gains Tax Calculator to model different scenarios.

Frequently Asked Questions

Do I need to report capital gains if my gain is below the AEA?

If you are within Self Assessment, you must report all disposals of chargeable assets. If your total proceeds exceed 4 × the AEA (£12,000 for 2025/2026) or total gains before losses exceed the AEA, you must report them on your tax return. For property disposals, a separate 60-day report to HMRC is required regardless of the amount.

Can I carry forward my unused Annual Exempt Amount?

No. The AEA is a "use it or lose it" allowance. Any unused portion is lost at the end of the tax year.

What is the deadline for paying CGT in 2025/2026?

For UK residential property disposals, CGT must be reported and paid within 60 days of completion via the HMRC online service. For all other assets, CGT is reported on your Self Assessment tax return and paid by 31 January 2027 (the payment deadline for the 2025/2026 tax year).

Are cryptocurrency gains subject to CGT?

Yes. HMRC treats cryptocurrency as a taxable asset. Gains on disposal of Bitcoin, Ethereum, and other cryptoassets are subject to CGT at the standard rates, and you can use the AEA and allowable deductions in the same way as for other assets.

I'm a non-UK resident. Do I need to pay CGT on UK shares?

Generally, no. Non-residents are not liable for CGT on UK shares unless the shares derive 75% or more of their value from UK land. However, your country of residence may tax the gain under its own rules.

Conclusion and Key Takeaways

The 2025/2026 tax year brings no relief from the significantly reduced Annual Exempt Amount of £3,000, making it more important than ever to understand and utilise every available deduction and allowance.

Key takeaways:

  • The AEA is £3,000 for individuals in 2025/2026 — plan carefully to use it each year
  • Deduct all allowable costs including purchase costs, improvement expenditure, and selling costs before calculating your gain
  • Business Asset Disposal Relief is available at 14% for qualifying disposals up to the £1 million lifetime limit
  • Capital losses can be offset against gains — review your portfolio before the tax year ends
  • Transfers between spouses are CGT-free and can effectively double your AEA
  • Non-residents are liable for CGT on UK property and land, with a 60-day reporting requirement
  • ISAs and pensions remain completely CGT-free and should be central to your investment strategy

Use our United Kingdom Capital Gains Tax Calculator to model your potential liability and explore how different deductions and reliefs affect your tax bill.

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.