Capital Gains Tax Allowance 2025: Planning After the £3,000 Reduction

The capital gains tax allowance 2025 remains at £3,000, representing a significant reduction from previous years that continues to impact property investors, shareholders, and business owners across the UK. Moreover, with recent rate increases announced in the Autumn Budget 2024, understanding how to optimize your capital gains tax allowance 2025 has never been more important.

This comprehensive guide examines the current capital gains tax allowance 2025, explains the recent changes, and provides practical strategies to help minimize your CGT liability. Additionally, we’ll explore the planning opportunities available to make the most of your reduced allowance.

Capital Gains Tax Allowance 2025: Current Position

Annual Exempt Amount

2025-26 Tax Year:

Individual allowance: £3,000
Trust allowance: £1,500 (£3,000 for vulnerable beneficiary trusts)
No change from 2024-25 levels

Historical Context

Recent reductions:

2022-23: £12,300 annual exempt amount
2023-24: £6,000 (50% reduction)
2024-25: £3,000 (further 50% reduction)
2025-26: £3,000 (unchanged but significantly lower than historical levels)

Source: HMRC Capital Gains Tax rates and allowances

Impact of the Reduction

What this means practically:

More taxpayers now liable to pay CGT on smaller gains
Increased tax burden for property investors and share dealers
Greater need for tax planning and timing of disposals
Enhanced importance of utilising ISAs and other tax-efficient vehicles

Capital Gains Tax Rates 2025: Recent Changes

Main CGT Rates (Effective from 30 October 2024)

For individuals:

Basic rate taxpayers: 18% (increased from 10%)
Higher rate taxpayers: 24% (increased from 20%)

For trustees and personal representatives:

Flat rate: 24% (increased from 20%)

Residential Property CGT Rates

Unchanged rates:

Basic rate taxpayers: 18%
Higher rate taxpayers: 24%

Important note: Property rates were already at these levels, so no increase for residential property investors.

Business Asset Disposal Relief

Phased increases:

From 6 April 2025: 14% (increased from 10%)
From 6 April 2026: 18% (further increase planned)
Lifetime limit: £1 million per individual

How Tax Bands Work

Rate determination: Your CGT rate depends on where gains fall when added to your taxable income:

Gains within basic rate band: 18% rate applies
Gains above basic rate threshold: 24% rate applies

Example calculation method:

Calculate taxable income: After personal allowance and deductions
Add capital gains: To determine total income
Apply rates: 18% on gains within basic rate band, 24% above

Capital Gains Tax Allowance 2025: Practical Examples

Example 1: Basic Rate Taxpayer

Scenario:

Taxable income: £20,000
Capital gain: £15,000
CGT allowance used: £3,000

Calculation:

Taxable gain: £15,000 – £3,000 = £12,000
Combined income: £20,000 + £12,000 = £32,000
All within basic rate band (£37,700 limit)
CGT due: £12,000 × 18% = £2,160

Example 2: Higher Rate Taxpayer

Scenario:

Taxable income: £60,000
Capital gain: £25,000
CGT allowance used: £3,000

Calculation:

Taxable gain: £25,000 – £3,000 = £22,000
All gain taxed at higher rate (income already above £37,700)
CGT due: £22,000 × 24% = £5,280

Example 3: Mixed Rate Application

Scenario:

Taxable income: £25,000
Capital gain: £20,000
CGT allowance used: £3,000

Calculation:

Taxable gain: £20,000 – £3,000 = £17,000
Basic rate capacity remaining: £37,700 – £25,000 = £12,700
CGT on first £12,700: £12,700 × 18% = £2,286
CGT on remaining £4,300: £4,300 × 24% = £1,032
Total CGT due: £2,286 + £1,032 = £3,318

Maximizing Your Capital Gains Tax Allowance 2025

Annual Planning Strategy

“Use it or lose it” principle:

Cannot carry forward unused allowance
Resets each tax year (6 April to 5 April)
Strategic timing of disposals to utilise full allowance

Best practices:

Regular portfolio review to identify realisation opportunities
Spread disposals across multiple tax years where possible
Consider December/January timing to optimise allowance usage

Spouse and Civil Partner Planning

Transfer opportunities:

No CGT on transfers between spouses/civil partners
Each person gets £3,000 allowance (£6,000 total per couple)
Different income tax positions may allow rate optimisation

Example strategy: If one spouse is basic rate taxpayer (18% CGT) and other is higher rate (24% CGT), transfer assets to basic rate spouse before disposal.

Bed and Breakfast Alternative Strategies

Traditional “bed and breakfast” no longer works:

30-day rule prevents repurchasing same shares immediately
Alternative approaches needed for rebalancing

Modern alternatives:

Spouse purchase: Sell shares and spouse purchases similar (but not identical) investments
ISA switching: Sell outside ISA and immediately purchase in spouse’s ISA
Fund switching: Move between similar but not identical funds

Tax-Efficient Vehicles and Capital Gains Tax Allowance 2025

ISAs and SIPPs

Complete CGT exemption:

Stocks & Shares ISAs: £20,000 annual allowance for 2025-26
SIPPs: No annual limit on contributions (subject to annual allowance rules)
No CGT within wrappers on disposals or switching

Strategy implications: Given reduced CGT allowance, tax-efficient vehicles become more valuable for regular traders and long-term investors.

Venture Capital Trusts (VCTs)

CGT advantages:

Tax-free disposals after minimum holding period
30% income tax relief on subscriptions up to £200,000 annually
Tax-free dividends from VCT investments

Enterprise Investment Scheme (EIS)

CGT benefits:

Disposal relief: No CGT on EIS shares after 3-year holding period
Deferral relief: Defer CGT on other gains by subscribing to EIS
30% income tax relief on investments up to £1 million

Property Investors and Capital Gains Tax Allowance 2025

Residential Property Considerations

Special rules for property:

Primary residence exemption: No CGT on main home disposal
Lettings relief: Up to £40,000 (£80,000 per couple) for shared occupancy
Final period exemption: Last 9 months always exempt
60-day reporting rule: UK residents must report property disposals within 60 days

Buy-to-Let Portfolio Management

Planning strategies:

Annual disposal planning: Realize up to £3,000 gains annually
Joint ownership advantages: Utilize both spouses’ allowances
Timing of improvements: Consider impact on base cost

Example annual strategy: Couple jointly owns 10 rental properties. Each year, dispose of properties with small gains (up to £6,000 total) and repurchase through pension funds or different ownership structures.

Business Owners and Capital Gains Tax Allowance 2025

Business Asset Disposal Relief (BADR)

Key features for 2025:

14% tax rate (increased from 10%)
£1 million lifetime limit per individual
Minimum ownership periods and qualifying conditions apply

Planning considerations:

Timing of disposals before April 2026 rate increase to 18%
Structuring transactions to maximise BADR eligibility
Multiple disposal strategy to spread over several tax years

Succession Planning

Family business transfers:

Hold-over relief available for gifts of business assets
Annual exemption planning for gradual transfers
Inheritance tax interaction with business property relief

Advanced Planning Strategies

Loss Harvesting

Utilising capital losses:

Current year losses offset gains pound-for-pound
Losses carried forward indefinitely until used
Strategic realisation of losses to offset future gains

Annual review process:

December portfolio review to identify loss positions
Strategic disposals before 5 April to optimise current year position
Documentation of losses for future use

Charitable Giving

CGT advantages:

No CGT on gifts to charity regardless of gain size
Income tax relief on gift value
Consider appreciated assets rather than cash donations

Overseas Considerations

New rules from April 2025:

Qualifying new residents may benefit from temporary exemptions
Remittance basis abolished for most taxpayers
Complex transitional rules for long-term non-domiciles

Source: HMRC guidance on foreign income and gains

Timing Strategies for Capital Gains Tax Allowance 2025

Year-End Planning (March/April)

Key considerations:

Review unrealized gains across all holdings
Identify realization opportunities up to allowance limit
Consider loss harvesting to offset larger gains
Plan spouse transfers if beneficial

Mid-Year Reviews

Ongoing management:

Track gains realised year-to-date
Identify remaining allowance available
Plan remaining disposals to optimize position
Consider ISA contributions to shelter future gains

Multi-Year Strategies

Long-term planning:

Spread large disposals across multiple tax years
Phase business sales to utilise multiple years’ allowances
Estate planning integration with IHT considerations

Common Mistakes to Avoid

Timing Errors

Frequent pitfalls:

Missing year-end deadline (5 April midnight)
Assuming tax year follows calendar year
Not accounting for settlement dates vs trade dates
Forgetting spouse transfer opportunities

Calculation Mistakes

Technical issues:

Incorrect base cost calculations for shares with various purchase dates
Missing improvement costs for property
Overlooking incidental costs of disposal
Share matching rule errors for same company holdings

Compliance Issues

Reporting requirements:

60-day rule for property disposals (not just payment deadline)
Self Assessment deadlines still apply
Record keeping requirements for all disposals
Professional advice for complex situations

Impact on Different Asset Classes

Shares and Securities

Practical implications:

Regular trading now more expensive due to higher rates
ISA priority increased given reduced allowance
Dividend vs growth strategy reconsideration

Investment Property

Key changes:

No rate increase (already at current levels)
Allowance reduction still impacts smaller portfolios
Corporate ownership structures may become attractive

Business Assets

Strategic considerations:

Incorporation timing may be affected by CGT rate changes
Disposal vs retention decisions influenced by new rates
Succession planning may need acceleration before further rate increases

Professional Advice and Compliance

When to Seek Help

Complex situations requiring professional advice:

Multiple asset disposals with timing considerations
Business sales involving BADR or hold-over relief
Overseas assets or residence issues
Trust and estate disposals

Record Keeping Requirements

Essential documentation:

Purchase records including incidental costs
Improvement costs and supporting invoices
Disposal details including professional fees
Annual calculations and planning decisions

For comprehensive deadline information, see our UK Tax Deadlines 2025 guide. For business-related CGT considerations, review our UK Corporation Tax Rates 2025 article.

Future Outlook and Planning

Anticipated Changes

Potential developments:

Further rate increases may be implemented
Allowance reductions could continue
Business reliefs may face additional restrictions
International coordination on tax rates

Long-Term Strategy

Planning considerations:

Asset location between taxable and tax-efficient accounts
Timing flexibility for discretionary disposals
Professional review of overall tax efficiency
Estate planning integration with CGT considerations

Conclusion

The capital gains tax allowance 2025 reduction to £3,000, combined with recent rate increases, represents a significant shift in the UK tax landscape. Furthermore, the changes particularly impact property investors, active share traders, and business owners who regularly realise capital gains.

Successful navigation of the new environment requires proactive planning, including annual allowance optimisation, strategic use of spouse transfers, and maximizing contributions to tax-efficient vehicles like ISAs. Additionally, the increased importance of timing disposals and maintaining accurate records cannot be overstated.

Finally, given the complexity of the new rules and the potential for further changes, professional advice becomes increasingly valuable for anyone with substantial capital gains exposure.

For related tax information affecting businesses and investors, see our Limited Company vs Sole Trader Tax 2025 comparison and VAT Registration Threshold UK 2025 guidance.

For the most current CGT rates and professional advice tailored to your situation, always refer to HMRC’s official Capital Gains Tax guidance and consider consulting with a qualified tax advisor.

CPD Information: Reading this article may contribute to your Continuing Professional Development (CPD) requirements. Please check with your professional body (ICAEW, ACCA, CIMA, etc.) for specific CPD recognition criteria.

Estimated Reading Time: 16 minutes

This article provides general guidance based on current HMRC requirements as of September 2025. Individual circumstances may vary, and professional advice should be sought for specific situations. Last updated: September 2025.