UK Capital Gains Tax Guide 2025: Complete Guide to CGT Rates & Tax-Saving Strategies
Capital Gains Tax (CGT) is charged when you sell assets for more than you paid for them, but with smart planning, you can significantly reduce or even eliminate your CGT liability. This comprehensive guide covers CGT rates, allowances, exemptions, and proven strategies used by investors to save thousands of pounds in Capital Gains Tax.
📊 Capital Gains Tax Rates 2024/25
Annual Exempt Amount
Tax-free capital gains per person, per year
Couples: £6,000 combined (if both use allowance)
CGT Rates by Asset Type
| Asset Type | Basic Rate Taxpayers | Higher/Additional Rate | Annual Allowance |
|---|---|---|---|
| Shares & General Assets | 10% | 20% | £3,000 |
| Residential Property | 18% | 28% | £3,000 |
| Business Assets (With Relief) | 10% | 20% | £3,000 |
💰 CGT Calculation Examples
Share Sale (Basic Rate Taxpayer)
Purchase Price: £10,000
Sale Price: £25,000
Gain: £15,000
Less Allowance: £3,000
Taxable Gain: £12,000
CGT Due: £1,200 (10%)
Property Sale (Higher Rate Taxpayer)
Purchase Price: £200,000
Sale Price: £350,000
Gain: £150,000
Less Allowance: £3,000
Taxable Gain: £147,000
CGT Due: £41,160 (28%)
Business Asset (With BAD Relief)
Purchase Price: £50,000
Sale Price: £200,000
Gain: £150,000
Business Asset Disposal Relief: 10%
Less Allowance: £3,000
CGT Due: £14,700 (10%)
🎯 10 Proven CGT Reduction Strategies
1. Use Annual Allowances Efficiently
Potential Saving: £600-£840 per year
Realize £3,000 of gains each year to use your allowance. For couples, that's £6,000 tax-free gains annually.
Example: Sell £3,000 worth of gains each year instead of £30,000 in one year
Saving: Use 10 years of allowances vs paying tax on £27,000
2. Transfer Assets to Spouse
Potential Saving: £3,000-£8,400+ per transfer
Transfers between spouses are tax-free, allowing you to use both CGT allowances and potentially benefit from different tax rates.
Example: Higher rate spouse transfers assets to basic rate spouse
CGT Rate Reduction: From 20% to 10% (shares) or 28% to 18% (property)
3. Bed and ISA Strategy
Potential Saving: Eliminate future CGT
Sell investments to realize gains (using annual allowance), then immediately repurchase within ISA wrapper.
Process: Sell £20,000 shares with £3,000 gain, buy back in ISA
Result: Use CGT allowance + future growth is tax-free
4. Loss Harvesting
Potential Saving: Offset unlimited gains
Realize losses to offset against gains in the same tax year or carry forward to future years.
Example: £10,000 loss offsets £10,000 gain
Tax Saved: £1,000-£2,800 depending on rates
5. Business Asset Disposal Relief
Potential Saving: £90,000 over lifetime
Qualify for 10% CGT rate on business disposals up to £1 million lifetime limit.
Example: Sell business for £500,000 gain
Standard CGT: £100,000 (20%)
With BAD Relief: £50,000 (10%)
Saving: £50,000
6. Investors' Relief
Potential Saving: 10% rate on qualifying shares
10% CGT rate on gains from qualifying unlisted company shares held for 3+ years.
7. Enterprise Investment Scheme (EIS)
Triple Tax Benefits:
- 30% income tax relief on investment
- Tax-free growth if held 3+ years
- Loss relief if investment fails
8. Principal Private Residence Relief
Potential Saving: Eliminate CGT entirely
Your main home is usually exempt from CGT. Partial relief available if used as main residence for part of ownership.
9. Rollover Relief
Defer CGT indefinitely
Defer CGT by reinvesting proceeds into qualifying business assets within specific timeframes.
10. Hold Assets Until Death
Eliminate CGT completely
Assets receive "uplift" to market value on death, eliminating all accrued gains for inheritance purposes.
🏠 Property CGT: Special Considerations
Residential Property CGT Rules
Main Home Exemption
Your principal private residence is usually exempt from CGT
Period of Absence Rules: Some periods away still qualify for exemption
Buy-to-Let Property
Investment property gains are subject to CGT at 18% or 28%
Lettings Relief: Up to £40,000 if property was ever your main home
Mixed Use Property
Business portion may qualify for lower 10%/20% rates if eligible for Business Asset Disposal Relief
Property CGT Optimization Strategies
1. Live in Property Before Letting
Make property your main residence for a period to qualify for partial Principal Private Residence Relief
Benefit: Proportional CGT exemption based on occupation period
2. Claim All Allowable Costs
Increase your base cost by claiming:
- Purchase costs (legal fees, stamp duty, survey)
- Improvement costs (not repairs)
- Sale costs (legal fees, estate agent fees)
3. Consider Company Ownership
For higher rate taxpayers, company ownership can reduce CGT from 28% to 19-25% Corporation Tax
Break-even: Usually beneficial for property portfolios
Calculate Your Capital Gains Tax
Use our calculators to estimate your CGT liability and explore tax-saving strategies: