Capital Gains Tax (CGT) in the UK has undergone significant changes effective from late 2024 and into the 2025 and 2026 tax years. The Latest Capital Gains Tax Updates 2025 UK include increased rates, reduced allowances, and new relief provisions that impact how much tax you pay on gains from asset disposals. These updates affect the rates, allowances, and reliefs available, making it essential for taxpayers to understand how to manage and minimize their CGT liabilities effectively.
Latest CGT Updates for 2025 and 2026
New CGT Rates and Allowances
- From 6 April 2025 onwards, the main CGT rates for individuals (excluding carried interest gains) are:
- 18% for gains within the basic income tax band.
- 24% for gains above the basic income tax band.
- Carried interest gains (commonly for investment fund managers) are taxed at 32%.
- Trustees and personal representatives generally pay 24%, or 32% on carried interest gains.
- Business Asset Disposal Relief (BADR) and Investors’ Relief rates increase to 14% from April 6, 2025, and further to 18% from April 6, 2026.
- The annual exempt amount (AEA) for individuals is reduced to £3,000 for 2025/26 (down from £6,000 in 2024/25), and £1,500 for trusts.
Transitional and Anti-Forestalling Measures
- The CGT rates increased from 10%/20% to 18%/24% for disposals after October 30, 2024.
- Anti-forestalling rules are in place to prevent taxpayers from structuring transactions to avoid the higher rates.
- Elections related to rollover relief and share reorganizations must be made by April 5, 2025, for disposals between April 6, 2023, and April 5, 2025.
Impact on Taxpayers
- The reduced allowance and higher rates mean more gains will be taxable.
- The Office for Budget Responsibility estimates CGT receipts of £19.7 billion in 2025-26, reflecting these changes.
How to Minimize Your Capital Gains Tax Liability in 2025 and 2026
1. Maximize Use of the Annual Exempt Amount
- Utilize the £3,000 CGT allowance fully each year.
- Couples can transfer assets between spouses or civil partners tax-free to double the allowance to £6,000.
2. Plan Timing of Asset Disposals
- Spread disposals over multiple tax years to benefit from multiple annual exemptions.
- Consider timing sales to years when your income is lower, potentially reducing your CGT rate.
3. Use Tax-Efficient Wrappers
- Invest through ISAs and pensions where gains are exempt from CGT.
- Consider transferring assets into these accounts where possible.
4. Offset Gains with Losses
- Claim allowable capital losses to offset gains in the same or future tax years, reducing taxable gains.
5. Take Advantage of Business Asset Disposal Relief
- For qualifying business disposals, BADR reduces CGT to 14% in 2025/26, rising to 18% in 2026.
- Plan disposals to meet BADR criteria before the rate increases fully apply.
6. Use Spousal Transfers Strategically
- Transfers between spouses or civil partners are exempt from CGT.
- This allows for income and gains to be split, potentially reducing tax rates and doubling allowances.
7. Consider Investment in EIS/SEIS Schemes
- These schemes offer CGT deferral or exemption on qualifying investments.
- Suitable for those with significant gains seeking tax-efficient investment opportunities.
8. Beware of Anti-Forestalling Rules
- Avoid transactions designed solely to circumvent higher CGT rates.
- Ensure elections for rollover relief and other provisions are made timely.
Example of CGT Calculation for 2025/26
- Taxable income: £20,000
- Taxable gains: £12,600
- Deduct annual exempt amount (£3,000), taxable gain = £9,600
- Combined income and gain = £29,600 (within basic rate band of £37,700)
- CGT payable at 18% = £1,728
For larger gains exceeding the basic rate band, gains above £37,700 are taxed at 24%.
Summary Table of Key CGT Rates (from 6 April 2025)
| Asset Type | Basic Rate Taxpayer | Higher Rate Taxpayer | Special Rates |
|---|---|---|---|
| Most chargeable assets | 18% | 24% | |
| Residential property gains | 18% | 24% | |
| Carried interest gains | 32% (all taxpayers) | 32% (all taxpayers) | |
| Business Asset Disposal Relief | 14% (2025/26) | 14% | 18% from April 2026 |
| Annual exempt amount (individuals) | £3,000 | £3,000 |
Conclusion
The CGT landscape for 2025 and 2026 in the UK demands careful planning due to reduced allowances and increased rates. By understanding the new rules and employing strategies such as maximizing exemptions, timing disposals, using tax-efficient accounts, and leveraging reliefs like BADR, taxpayers can effectively minimize their CGT liability.
For complex situations or significant gains, you should seek professional tax advice to navigate the evolving CGT environment and to ensure compliance while optimizing tax outcomes.