Article last updated 3 February 2026.
Capital gains tax (CGT) affects anyone who sells investments, property, or valuable assets at a profit. With allowances falling and rules evolving, CGT planning has become an essential part of tax‑efficient investing. This guide explains how CGT works, how it’s calculated, and how bespoke portfolio management can help reduce CGT liabilities over time.
This information is based on our current understanding of HMRC tax rules in the UK. Tax treatment depends on your personal circumstances, which could change.
What is CGT and how is it calculated?
CGT is a tax on the profit when you sell or give away certain assets (we’ve provided a list below of which assets CGT is applied to). You pay tax on the increase in value, not the total sale price. Some costs of buying and selling can reduce the taxable gain.
Each tax year you have a tax-free allowance – known as the Annual Exemption Amount. You only pay CGT on profits above this amount. The annual exempt amount is £3,000 for individuals and personal representatives, and £1,500 for most trustees. This is a reduction from previous years (e.g., £6,000 in 2023/24).
Strategies for reducing CGT
Any reduction in CGT liabilities will increase what you have available to continue compounding your investment returns over the long run. Strategies for minimising CGT fall into several categories:
1. Use your annual allowance every year
Realising gains annually – rather than accumulating large gains over several years – minimises tax exposure.
2. Harvest losses proactively
Losses can be used to offset gains either in the same year or future years.
3. Make the most of tax-efficient wrappers
Individual savings accounts (ISAs), pensions, and government bonds (gilts) all offer different ways of sheltering your hard-earned money from tax, including CGT. Gains on money invested in ISAs, pensions, gilts are exempt from CGT, which reduces your CGT liabilities.
4. Consider asset location
Place high-growth assets in ISAs and other tax wrappers; use taxable accounts for lower-growth assets.
5. Use spousal transfers
Spouses and civil partners can transfer assets between themselves tax free.
6. Time your disposals wisely
Selling near the tax year end allows strategic use of allowances.
Why bespoke portfolio management is so effective
A bespoke portfolio management service can help you implement these strategies, while also ensuring that your tax strategy is aligned with your investment strategy – rather than working against it. Here are the ways a bespoke service can help:
Continuous allowance management
A dedicated portfolio manager can ensure allowances are used annually and timed most effectively.
Real-time decision-making
Markets move quickly – having a manager oversee timing reduces tax drag.
Portfolio-wide tax oversight
You benefit from integrated planning across wrappers, accounts, and asset classes.
Integrated wealth planning
CGT strategy is aligned with broader goals – from retirement income planning to inheritance strategy.
Adapting to evolving tax rules
With CGT allowances declining and rules shifting frequently, active management ensures your portfolio is continuously optimised.
Which investments are subject to CGT?
Assets typically subject to CGT include:
• Shares
• Collective investment funds
• Investment trusts
• Exchange-Traded Funds (ETFs)
• Land
• Additional properties
• Valuable possessions (art, jewellery)
Which assets are exempt from CGT?
Some assets are sheltered from CGT entirely:
• Your primary residence (subject to certain conditions)
• Certain personal possessions
• UK government bonds (gilts)
• Shares held via Venture Capital Trusts and Enterprise Investment Scheme which qualify for disposal relief (please seek further professional advice and guidance)
• Qualifying corporate bonds
• Premium bonds
How much CGT do I need to pay?
Once you’ve worked out which assets need to be assessed for CGT, here’s a summary of CGT rates for the 2025/26 tax year and where they apply:
| Category | Rate |
| Basic-rate taxpayers | 18% |
| Higher/additional-rate taxpayers | 24% |
| Residential property | 18% (basic rate); 24% (higher rate) |
| Business Asset Disposal Relief | 14% from Apr 2025; 18% from Apr 2026 |
Reporting and compliance
CGT needs to be reported either through:
- Self Assessment
- HMRC’s Capital Gains Tax Service
- UK Property Reporting Service (for residential property).
In general, records must be kept for at least five years after the 31 January submission deadline.
Ready to take action?
CGT is complex – but it doesn’t have to be. A financial professional can help you reduce liabilities today and compound your wealth for tomorrow. If you’re ready to take action, email your usual Rathbones contact or fill out our form below.
Common questions about CGT
What is the capital gains tax allowance in the UK?
The annual exempt amount is £3,000 for individuals and personal representatives, and £1,500 for most trustees. This is a reduction from previous years (e.g., £6,000 in 2023/24).
How do I reduce capital gains tax in the UK?
Use allowances, harvest losses, maximise the benefits of tax wrappers such as ISAs, pensions and offshore bonds, and time disposals across tax years.
Do I pay CGT when transferring investments between accounts?
You may pay CGT depending on the type of transfer, because HMRC treats many transfers as disposals, making them liable for CGT.
Do I pay CGT when transferring investments into an ISA?
Yes – so-called ‘Bed and ISA’ transfers (when you sell an investment and immediately buy it back inside an ISA to shelter future gains from tax) of investments from another account into an ISA count as disposals, so CGT may apply.
Do I pay CGT when gifting assets?
Gifts usually count as a disposal for CGT purposes. HMRC treats the asset as if you sold it for its full market value. There are exemptions to this rule, such as when you gift to your spouse or civil partner, you gift to a registered charity, or you use reliefs like Private Residence Relief or Business Asset Disposal Relief.
Can I carry forward capital losses?
Yes, indefinitely – provided you report them to HMRC.
When is CGT payable?
CGT is generally payable by 31 January following the end of the tax year in which the disposal occurred.