How to minimise CGT liability and manage Capital Gains Tax

When disposing of, transferring or gifting assets, Capital Gains Tax may be charged on the profit you make from those assets. However, you need to understand the rules around Capital Gains Tax and understand if there are ways to reduce your CGT bill.

In this blog, we’ll explain what you need to know about CGT and the tax implications of disposing of assets.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a UK tax that is levied on the profit (a capital gain) you make when you dispose of an asset that has increased in value. The tax applies only to the gain in value (the difference between the original value at the date you acquired the asset, and the new value at the date you sold the asset), not the total amount of money you realise from the sale.

It’s important to note that the term disposal is used very specifically, as CGT applies not only where you have sold a valuable asset, but can also apply where you gift the asset for free to someone, exchange the asset for something else, or you are transferring assets to another person and the asset has increased in value since the time you bought it.

If you make a loss when disposing of an asset and declare it to HM Revenue and Customs (HMRC) you are able to carry that loss forward to offset against future gains.

Which assets fall under Capital Gains Tax rules?

Capital Gains Tax generally applies to the disposal of certain assets. It applies to the following types of assets:

• Tangible assets, i.e. something that you can touch or move. Such assets may include antiques, artwork, high-value jewellery, fine wines and motor vehicles (although your private vehicle is exempt); and
• Intangible assets such as property (excluding your home), cryptocurrencies, stocks and shares, copyrights, trademarks, and domain names, which are bought and sold for profit.

The rules differ for tangible and intangible assets.

Capital Gains Tax and tangible assets

When calculating your capital gain on tangible assets, sometimes also called ‘chattels’, the following considerations apply:

• Did you receive less than £6,000 in sales proceeds when you sold the asset? If you did, then the disposal is exempt from CGT, and you do not have to report it on your self-assessment tax return.
• Were your proceeds more than £6,000 but less than £15,000? If so, there are a number of specific steps to follow to calculate the chargeable gain. This can be complex, and using a professional advisor to assist with the calculation is advisable.
• Did you receive less than £6,000 in sale proceeds and make a loss? If so, you should inform HMRC of this on your return and, together with your advisor, ensure the loss is offset against future gains.

Capital Gains Tax and intangible assets

If your assets are fixed, such as a property, or intangible, such as Cryptocurrencies, the CGT rates for the 2025/26 tax year are 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers.

It is important to note that for companies, gains from the disposal of most intangible assets are subject to Corporation Tax, not Capital Gains Tax.

What is exempt from Capital Gains Tax?

Many personal possessions which can be valuable are exempt from CGT and won’t be taxed if you make a gain from them. This includes:

• Privately owned cars (unless you use your car for business).
• Your residential home.
• Lottery winnings.
• Cash, stocks and shares held in an Individual Savings Account (ISA).
• Shares that qualify under the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS).

Disposals made to a married spouse, civil partner, or UK-registered charity are also exempt from CGT.

What are the Capital Gains Tax rates?

For higher or additional rate Income Tax payers, the amount you pay will depend on the date and type of your gain.

Gains from 6 April 2025 onwards:

• 24% on your gains from residential property.
• 32% for carried interest gains.
• 24% on your gains from other chargeable assets.

For basic rate Income Tax

If you are a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.

Gains from 6 April 2025 onwards:

• 18% on your gains from residential property.
• 32% for carried interest gains.
• 18% on your gains from other chargeable assets.

Carried interest is a share of the profits that investment fund managers receive as part of their remuneration that is taxed as capital gains rather than as income.

A single gain can be split across tax rates. For example, if your annual income, including the taxable gain you made, falls within the basic rate income tax threshold, then your entire gain is chargeable at 18%. If, however, your gain pushes your total annual income above the basic rate income threshold, the excess will be charged at 24%.

If you are a higher or additional rate income taxpayer, based solely on your income, regardless of the value of the gain, your entire gain will be subject to 24%.

Are there any allowances that can help reduce Capital Gains Tax liability?

Using your annual CGT allowance

Several allowances can minimise your CGT liability. You can make use of your annual Capital Gains Tax allowance to reduce your tax bill. Every individual taxpayer is entitled to an annual CGT allowance (also called the Annual Exemption Amount), which for the 2025/26 tax year is £3,000. This means you can realise up to £3,000 in capital gains tax in a year without being required to pay CGT on it.

You must still report the gain on your tax return, and you cannot carry it forward to next year.

Spousal exemption rule

Any transfer of assets between married couples and civil partners is tax-free, regardless of value. This can be a useful tool to minimise your CGT liability. For example, if you want to dispose of an asset but have used your annual allowance, you can transfer that asset tax-free to your spouse/civil partner, who can then apply their annual allowance to the disposal of the asset.

Investors’ Relief

Investors’ Relief (IR) is a tax relief that allows you to reduce your rate of CGT if you make gains on the disposal of shares in an unlisted trading company. IR is specifically aimed at those investors who are not employees in a company in which they hold qualifying shares.

Business Asset Disposal Relief (BADR)

BADR is a form of Capital Gains Tax relief that can help business owners reduce their tax liability when they dispose of part or all of their business. This was previously known as Entrepreneurs’ Relief, which was renamed Business Asset Disposal Relief in 2020.

In essence, BADR allows you to dispose of qualifying business assets at the minimum rate of capital gains tax regardless of your income tax band.

Business Asset Disposal Relief has its own set of qualifying rules, limits and interaction with other taxes. It’s vital to seek professional advice when exploring whether you qualify for BADR.

Summary of allowances and reliefs that help you reduce your Capital Gains Tax bill

There are many tax strategies that can be put in place depending on your personal circumstances. Some of the ways in which you can manage and mitigate your tax liability within HMRC-approved parameters include:

• Offsetting gains with capital losses.
• Reducing your CGT rate by making pension contributions. Ensure you understand the thresholds that apply for the given tax years.
• Use your annual exemption.
• Use your spouse or civil partner exemption.
• Make charitable donations.
• Shelter investments from tax with ISA products. Again, ensure you understand the specific tax regime governing ISAs.
• Consider EIS/SEIS investments.
• External investors should claim Investors’ Relief.
• Business Asset Disposal Relief (BADR) is useful for those exiting businesses and wanting to reduce their tax burden.

How to report and pay Capital Gains Tax

It is essential to understand the reporting and payment requirements for Capital Gains Tax. There are two options:

• If you are NOT registered for self-assessment and the proceeds from your disposal (the entire sum not just the capital gain) do not exceed £50,000 then you can report through HMRC’s real time submission portal.
• If you ARE registered for self-assessment, you will have to complete your CGT reporting through your self-assessment tax return. If you are completing a self-assessment tax return, you must file this with HMRC by 31 January following the end of the tax year in which you made the disposal.

Beware! The rules are different for property disposals.

Capital Gains Tax and Property Disposals

When it comes to residential property, there are very specific rules and deadlines. Second homes, furnished holiday lets, buy-to-let investment properties or properties you inherit and then sell (which are not your principal private residence/home), require that you report the disposal and pay any CGT owed within 60 days of completion of the disposal.

The tax payable can be paid online, by bank transfer or by cheque.

What penalties are applied for late CGT submissions?

Late filing penalties are automatically issued when reporting through the self-assessment process and the 60-day reporting process, as follows:

• If your return is up to 3 months late, you are fined £100.
• If it is still not filed after 3 months, daily penalties of £10 are charged for up to 90 days.
• If your return is more than 6 months late, you will be fined either £300 or 5% of the tax due – whichever is higher.
• If your return is more than 12 months late, a further £300 or 5% of the tax due applies.
• HMRC also charges interest on overdue tax.

Summary

Capital Gains Tax rules are complex. Reducing Capital Gains Tax is possible with advance planning. You must work with your financial advisers and accountants to review investments, the interaction between CGT and other taxes, and the impact on your tax position and long-term financial planning.

To reduce your CGT tax bill, make sure to use your full allowance, claim any reliefs available, offset losses, plan sales across different tax years, and use tax-efficient accounts such as ISAs. Knowing these rules helps you keep more of your profits. For complex cases, it’s best to seek professional advice.

Contact us today to see if you can minimise CGT exposure and reduce your CGT bill on 03300 886 686 or email us at [email protected].

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.