The Capital Gains Tax (CGT) environment in the United Kingdom has changed significantly in 2025, affecting both people and corporations. Understanding these developments is essential to preventing unforeseen obligations, given the yearly UK CGT allowance has been lowered and tax rates have increased. The purpose of this guide is to educate, motivate, and enable you to successfully negotiate the new tax landscape.
Understanding the 2025 UK CGT Allowance Changes
What Is the UK CGT Allowance?
The profit you can make from selling assets before paying taxes is known as the CGT allowance. This allowance is £3,000 as of the 2025–2026 tax year, which is a substantial decrease from prior years.
Key Changes in 2025:
- Annual Exempt Amount (AEA): Reduced to £3,000 for individuals and £1,500 for trustees.
- Tax Rates: Basic-rate taxpayers now pay 18% more in taxes, while higher-rate taxpayers pay 24% more.
- Business Asset Disposal Relief (BADR): In April 2025, the rate went up from 10% to 14%, and in April 2026, it rose to 18%.
What Is Capital Gains Tax (CGT) Allowance?
When you sell or otherwise dispose of an asset that has gained in value, such shares, real estate, or a company, you are subject to capital gains tax (CGT), which is a tax on the profit (gain). The part of the gain that is tax-free each tax year is called the CGT allowance, or the Annual Exempt Amount (AEA).
For the 2025/26 tax year, the CGT allowance has been significantly reduced to £3,000 for individuals and £1,500 for trustees, down from £6,000 in 2023/24 and £12,300 in 2022/23. This change means that a much larger number of taxpayers will now be required to pay CGT on even relatively modest gains.
Key Changes in 2025
1. Annual Exempt Amount (AEA):
- For individuals: Now set at £3,000 per year. Any capital gains above this threshold are taxable.
- For trustees: Now £1,500 per year. This is true for trusts that own assets like real estate or investment portfolios.
2. Increased CGT Rates:
- Basic-rate taxpayers: Now pay 18% on gains from most assets (e.g. shares).
- Higher-rate and additional-rate taxpayers: Taxpayers with higher and extra rates are now subject to a 24% CGT rate..
- Note: For residential property (that isn’t your primary home), rates remain higher — 18% for basic-rate and 28% for higher-rate taxpayers.
3. Business Asset Disposal Relief (BADR):
- company owners can sell qualified company assets at a reduced CGT rate thanks to BADR, formerly known as Entrepreneurs’ Relief. But starting in April 2025, the advantages are being reduced:
- In April 2025, the BADR rate rose from 10% to 14%.
- April 2026 is when a further increase of 18% is planned.
- This implies that unless they take action prior to the rate rises, business owners who sell their companies will be subject to much higher tax obligations.
These changes reflect a tightening of CGT policy in the UK, with a clear intention to increase tax revenues by lowering the exempt amount and raising rates, particularly on business disposals. Individuals and business owners are advised to carefully review their investment and asset disposal plans in light of these developments.
The Impact on Individuals and Businesses: UK CGT Allowance
For Individuals:
With the reduced allowance, even modest gains from selling assets like shares or property can lead to tax liabilities. This change particularly affects those who previously fell below the threshold and now must report and pay CGT
For Business Owners: UK CGT Allowance
The increase in BADR rates means that entrepreneurs selling their businesses will face higher tax bills. For example, selling a business for a £2 million gain could result in an additional £40,000 in CGT if sold after April 2025.
Strategies to Mitigate CGT Liabilities
1. Utilize Tax-Efficient Investment Wrappers
Using pensions and ISAs to invest can protect your profits from CGT. In 2025/26, you can contribute up to £20,000 to ISAs and up to £60,000 to pensions, depending on your income.
2. Offset Gains with Losses
You can lower your CGT obligation by offsetting losses from other assets against your gains. This strategy requires meticulous record-keeping and timely reporting to HMRC.
3. Transfer Assets Between Spouses
Your CGT allowance can be practically doubled by transferring assets to a spouse or civil partner, increasing the amount of profits that are tax-free.
4. Plan Asset Sales Strategically
Timing the sale of assets to fall within different tax years can help you utilize multiple annual allowances, reducing your overall CGT liability.
Lesser-Known Considerations
Changes for Trustees and Personal Representatives
From October 2024, the CGT rate for trustees and personal representatives increased from 20% to 24%, affecting the administration of estates and trusts.
Impact on Non-Domiciled Individuals
The phasing out of the non-domicile status in favor of a residence-based tax regime has led to a decline in CGT receipts, as wealthy individuals relocate due to less favorable tax conditions.
Building Trust with Professional Guidance
Navigating the complexities of CGT requires professional expertise. At Eternity Accountants, we offer personalized tax planning and accountancy services to help you optimize your financial outcomes. To give you quick and accurate guidance, our staff keeps up with the most recent tax legislation.
Frequently Asked Questions – UK CGT Allowance 2025/26
Q1: What is the current UK CGT allowance for individuals in 2025/26?
Answer: As of the 2025/26 tax year, the Capital Gains Tax (CGT) allowance — officially called the Annual Exempt Amount (AEA) — has been reduced to:
- £3,000 for individuals
- £1,500 for trustees
This is a sharp drop from previous years and means more taxpayers will now face CGT liabilities, even for small gains.
Q2: How can I reduce my CGT liability legally?
Answer:: There are several smart ways to reduce your CGT bill:
- Use your ISA allowance – gains inside ISAs are tax-free.
- Maximise pension contributions – pensions can help reduce overall taxable income.
- Offset losses – declare capital losses to reduce your overall gain.
- Give assets to a spouse or civil partner: Giving assets to a spouse or civil partner may quadruple your tax-free allowance.
- Time your sales – selling over multiple tax years may help use your allowance more effectively.
- Consider reinvestment reliefs if you’re eligible.
Pro tip: Always seek advice from a tax advisor like Eternity Accountants to make the most of your options.
Q3: What is Business Asset Disposal Relief (BADR), and how is it changing?
Answer: The answer is that when qualified business owners sell all or a portion of their company, BADR (previously Entrepreneurs’ Relief) allows them to pay a lower CGT rate.
Among the major revisions are:
- In April 2025, the ADR rate rose from 10% to 14%.
- An additional 18% rise is anticipated in April 2026.
- Lifetime limit remains at £1 million
Who benefits? Sole traders, business partners, and company directors with 5%+ shareholding and voting rights. This change means early planning is critical to avoid a higher tax burden.
Q4: What are the new CGT rates for trustees and personal representatives in 2025/26?
Answer: From October 2024, the Capital Gains Tax rate for trustees and personal representatives (e.g. during estate administration) has increased:
- From 20% to 24% on chargeable gains (excluding residential property)
- Residential property CGT rates remain at 28%
This update tightens tax obligations for trusts, so careful planning of estate and trust structures is now more crucial than ever.
Q5: Do landlords pay a different CGT rate when selling property?
Answer: Yes. CGT on residential property is typically higher:
- 18% for basic-rate taxpayers
- 28% for higher- and additional-rate taxpayers
Also, landlords cannot claim Private Residence Relief unless the property was their primary home. With the reduced CGT allowance, even small capital gains may now attract tax.
Q6: Is CGT different for UK non-residents?
Answer: Absolutely. Non-residents must pay CGT on:
- UK residential property (since April 2015)
- UK commercial property and land (since April 2019)
- Indirect property disposals, like shares in UK property-rich companies
Even if no tax is owed, they still have to file a CGT return within 60 days of finishing, which many people forget and are penalized for.
Q7: Should small business owners consider professional CGT planning?
Answer: Absolutely. With reduced allowances and increased rates, business owners can no longer afford casual planning. A qualified tax advisor can:
Help structure shareholdings
Guide on BADR eligibility
Time asset disposals for best results
Ensure full compliance with latest laws
This is where Eternity Accountants comes in — we simplify the complexity and ensure you only pay what’s fair.
Q8: Can CGT impact my inheritance planning?
Answer:: Yes. CGT interacts with Inheritance Tax (IHT), especially in estate planning:
- Some assets may be subject to CGT on lifetime disposal and IHT on death
- “Rebasing” rules can reset asset values when passed on
- Trusts and estate strategies can help reduce both CGT and IHT
- Getting early advice is key to protecting your legacy.
Ready to Make Smarter Tax Decisions?
With the 2025 CGT changes, now is the time to act. Whether you’re a business owner, property investor, or just someone with a growing portfolio — our experienced tax and personal accounts managers at Eternity Accountants are here to guide you every step of the way.
Take Control of Your Tax Future: UK CGT Allowance
The changes to the UK CGT allowance in 2025 present challenges but also opportunities for strategic financial planning. By understanding the new rules and implementing effective tax strategies, you can minimize liabilities and maximize your financial well-being. With our individualized services and professional assistance, we at Eternity Accountants are here to help you navigate these changes.
