The CGT annual exemption (also called the Annual Exempt Amount) is the amount of net capital gains you can realise each tax year before any CGT becomes payable. For 2026/27, the exemption is £3,000 per person.
The exemption applies to gains from all chargeable assets: shares, funds, investment property, second homes, business assets, and collectibles. It does not apply to assets held inside an ISA or pension — those are already CGT-free.
The exemption is deducted from your net gain — that is, after subtracting allowable costs and any capital losses. Only the remaining taxable gain is subject to CGT at 18% (basic rate) or 24% (higher/additional rate).
The CGT annual exemption was cut dramatically between 2022 and 2024 — from £12,300 to just £3,000 in two steps. This has significantly increased the number of people with a CGT liability, particularly investors with share portfolios and second property owners.
| Tax Year | Annual Exemption | Change | Tax Saving Lost (24% rate) |
|---|---|---|---|
| 2022/23 | £12,300 | — | — |
| 2023/24 | £6,000 | −£6,300 | −£1,512 |
| 2024/25 | £3,000 | −£3,000 | −£720 |
| 2025/26 | £3,000 | No change | — |
| 2026/27 | £3,000 | No change | — |
A higher-rate taxpayer who previously crystallised £12,300 of gains per year tax-free now pays CGT at 24% on £9,300 more each year — an extra £2,232 in tax annually on the same disposal pattern. This has made annual portfolio rebalancing significantly more expensive and has put pressure on property investors selling long-held assets.
The exemption is applied to your total net gains for the tax year — not to each disposal individually. If you sell multiple assets in the same tax year, all gains and losses are netted off first, and then the £3,000 exemption is applied to the net figure.
| Taxable Gain | Basic Rate (18%) | Higher Rate (24%) |
|---|---|---|
| £3,000 (within exemption) | £0 | £0 |
| £5,000 (£2,000 taxable) | £360 | £480 |
| £10,000 (£7,000 taxable) | £1,260 | £1,680 |
| £25,000 (£22,000 taxable) | £3,960 | £5,280 |
| £50,000 (£47,000 taxable) | £8,460 | £11,280 |
| £100,000 (£97,000 taxable) | £17,460 | £23,280 |
Capital losses are only used to the extent needed to reduce gains above the exemption level. If your gains are £5,000 and you have a £4,000 loss, you only use £2,000 of the loss (to reduce the gain to £3,000 — the exemption level). The remaining £2,000 loss is carried forward. This preserves losses for future years rather than wasting them against gains already covered by the exemption.
Married couples and civil partners each have their own £3,000 annual CGT exemption. A couple can shelter up to £6,000 of gains per year by ensuring assets are jointly owned before disposal.
For assets where one spouse has a lower tax rate, transferring ownership to the lower-rate spouse before disposal can also reduce the CGT rate from 24% to 18% — potentially saving an additional 6% on the taxable gain.
Sell investments outside an ISA to crystallise a gain up to £3,000, then immediately repurchase the same investments inside a Stocks and Shares ISA. The gain up to £3,000 is sheltered by the exemption. Future growth in the ISA is completely free of CGT, regardless of how large the gain eventually becomes. You must have ISA allowance available (£20,000 per year in 2026/27).
If you are selling an asset with a large embedded gain, consider whether it is possible to complete the disposal in two stages across two tax years — each using a separate £3,000 exemption. This is not always practical for property, but it works well for share portfolios, where you can sell a portion before 5 April and the remainder after.
Register capital losses with HMRC (even if you had no gains that year) so they can be carried forward indefinitely. Carried-forward losses can offset future gains above the exemption. Losses are only used to reduce gains above the exemption, so they never "waste" the annual allowance.
If a large gain would push you into the higher rate band, making a pension contribution in the same tax year reduces your adjusted net income. This can keep the gain within the basic rate band, reducing CGT from 24% to 18%. A £10,000 pension contribution could save £600 in CGT on a £10,000 taxable gain.
Helen has a Stocks and Shares ISA and a general investment account. Her GIA holds £18,000 of index funds with an embedded gain of £8,000. Her ISA allowance for 2026/27 is unused. She sells all the funds in the GIA in June 2026 to crystallise the gain.
Net gain: £8,000
Less annual exemption: −£3,000
Taxable gain: £5,000 at 18% = £900 CGT
She then repurchases the same funds inside her ISA. From now on, all future growth is CGT-free inside the ISA.
CGT due: £900. Annual exemption saved her £540 (£3,000 × 18%). All future growth now sheltered in ISA.
Tom and Lisa jointly own a buy-to-let property (50/50). They sell for a combined net gain of £60,000 — £30,000 each. Both are higher-rate taxpayers.
Per person: £30,000 gain − £3,000 exemption = £27,000 taxable at 24% = £6,480 each
Total CGT: £12,960. Using both exemptions saved the couple £1,440 compared to sole ownership (where only one £3,000 exemption applies).
Had Tom owned it solely, the taxable gain would have been £57,000 × 24% = £13,680 — £720 more.
Rachel has a £120,000 share portfolio (outside an ISA) with a growing embedded gain. Each April, she reviews her portfolio and sells enough holdings to realise exactly £3,000 of gains — then repurchases similar (not identical) investments after 30 days to reset her base cost.
By using the exemption every year, she prevents her portfolio from accumulating a large taxable gain that would eventually crystallise in a single year. At her higher rate (24%), she saves £720 per year — £7,200 over 10 years — through consistent annual use of the exemption.
Annual saving: £720/year at higher rate. The 30-day "bed and re-purchase" rule means she must buy different (not identical) shares, or wait 30 days. "Bed and ISA" avoids the 30-day restriction entirely.
Calculate your CGT liability before applying the annual exemption.
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