For UK investors, property owners, and business sellers, capital gains tax (CGT) remains one of the most significant considerations when timing asset disposals. The 2026/27 tax year brings important changes that investors may find it useful to understand, particularly the increase in Business Asset Disposal Relief and the continued squeeze on annual exemptions.
This guide explains the current CGT landscape, how recent changes affect your planning, and practical approaches some people consider when managing their tax position. Whether you're a seasoned investor reviewing portfolio strategy or a business owner contemplating a sale, understanding these rates and allowances is crucial for making informed financial decisions.
Current CGT rates for 2026/27
Capital gains tax in the UK is calculated on the profit made when you sell an asset. The rate you pay depends on your income tax band and the type of asset being sold. This dual-rate structure means the effective cost of CGT varies significantly based on individual circumstances and income levels.
Standard asset rates
For most investment assets, including shares, investment property (not your main residence), and other securities, the CGT rates are straightforward but significant:
| Tax band | CGT rate |
|---|---|
| Basic rate (up to £50,270) | 18% |
| Higher rate (over £50,270) | 24% |
The distinction between basic and higher rate is important for planning purposes. Your applicable rate is determined by adding your capital gains to your income for the year. If your total taxable income (including gains) exceeds £50,270, the excess portion of gains is taxed at 24%. This creates a meaningful planning consideration: realising gains in years with lower income, or spreading realisations across multiple tax years, may result in preferential rates.
Residential property CGT
Gains on residential property (excluding your main residence, which is usually exempt through private residence relief) are taxed at the same 18% and 24% rates as other assets. This is a relatively recent alignment: residential property historically carried a higher-rate surcharge, but since the main CGT rates rose to 18% and 24%, the two sets of rates have been unified.
For investors with buy-to-let portfolios or second homes, the tax cost remains substantial even without a separate surcharge. A £100,000 gain on residential property results in £18,000 or £24,000 CGT depending on your tax band. Bear in mind that residential disposals also come with a tighter reporting deadline: UK residential property gains must generally be reported and the tax paid within 60 days of completion.
The £3,000 annual exemption
Every UK resident receives an annual exemption allowance of £3,000 for the 2026/27 tax year. This means you can realise gains up to this amount without paying any CGT, a meaningful shield for active investors, but one that has been frozen in place for several years with no indication of future uplifts.
Key points about the exemption
- The allowance has been £3,000 since April 2024 (down from £12,300 as recently as 2022/23). It cannot be carried forward to future years, so unused amounts are simply lost
- It applies to each individual separately (married couples receive £6,000 combined, providing valuable planning opportunities)
- Only gains above the exemption are subject to tax: you don't pay CGT on the first £3,000
- It applies across all gains: you cannot allocate it selectively to certain assets or reserve it for future years
Impact on investors: The frozen allowance combined with inflation and portfolio growth means more of your investment gains are exposed to tax each year. If you realise £20,000 of gains, only £3,000 is sheltered; the remaining £17,000 is fully taxable at your marginal rate. For investors who have held appreciating assets for many years, this creates a compounding impact.
Business asset disposal relief: what's changed
One of the most significant changes for 2026/27 is Business Asset Disposal Relief increasing to 18% from April 2026, up from 14% in 2025/26 (the rate was 10% before April 2025). This staged increase is critical for anyone contemplating a business sale, as it significantly affects the net proceeds received after tax.
What this means in practice
Business Asset Disposal Relief allows qualifying individuals to claim a reduced rate of CGT when they sell or dispose of business assets. Charged at 10% until April 2025 and 14% in 2025/26, the rate is now 18% from April 2026, a substantial change for business owners timing their exit strategies.
Example: If you sell a qualifying business and realise a £100,000 gain, at 2025/26's 14% rate you'd have paid £14,000 in CGT. Under the 18% rate, the same £100,000 gain now incurs £18,000 CGT, a £4,000 increase. For a larger sale of £500,000 gain, that's a £20,000 difference in tax, which materially affects your sale proceeds.
Eligibility requirements
To qualify for Business Asset Disposal Relief, you must meet strict conditions. The relief is not automatic; HMRC assesses whether assets qualify based on your ownership history and business involvement:
- The asset must be a qualifying business asset or shares in a qualifying business (not passive investments)
- You must have owned the asset (or shares) throughout the two years ending with the date of disposal
- The business must have been your own business (not passive or dormant holdings)
- There is a £1 million lifetime limit on the gains that can benefit from the relief
The cumulative impact: why CGT planning matters
Three factors combined create a more challenging tax environment than previous years:
- Frozen annual exemption: The £3,000 allowance hasn't moved since 2023, while asset valuations and investment portfolios continue to grow due to market performance and inflation.
- Higher standard rates: At 18% and 24%, the rates are elevated compared to previous years, materially increasing the tax cost of any major realisations.
- Increased business relief rates: The 18% rate on qualifying business disposals removes a significant tax advantage that previously incentivised entrepreneurship and business ownership.
It's important to be aware that these changes mean investors are likely to face higher CGT bills unless they take active steps to manage their tax exposure. For high net worth individuals with substantial portfolios or business owners approaching retirement, this creates a compelling case for structured tax planning.
Practical strategies some investors consider
1. Spousal transfers
Married couples have a combined annual exemption of £6,000. One approach some people consider is transferring assets between spouses at no gain or loss (at cost), allowing the spouse with lower income to realise gains. This may enable both exemptions to be used effectively if one spouse is in a lower tax bracket, effectively doubling the tax-free allowance available.
Note: Spousal transfers must be at genuine market value or at cost; they receive special CGT treatment but still require proper documentation for HMRC purposes.
2. Spreading disposals across tax years
Rather than realising all gains in a single tax year, some investors find it useful to spread major disposals across two or more tax years to take advantage of the annual exemption in each year. This approach may reduce total tax paid by keeping gains in lower tax brackets.
3. Loss harvesting and matching gains
Capital losses can be offset against capital gains in the same tax year or carried forward to future years indefinitely. One approach people consider is deliberately crystallising losses on underperforming investments to offset gains elsewhere, a practice known as 'loss harvesting'. This may reduce the overall gain subject to tax, though it requires careful execution.
4. Timing of asset sales and market conditions
Some investors monitor market conditions and consider realising gains when they've achieved their investment objectives, rather than holding assets in the hope of further gains. Planning the timing can sometimes align with tax-efficient periods, particularly if you anticipate lower income in a particular year.
5. Residential property considerations
Residential property gains are taxed at the same 18% and 24% rates as other assets, but main residence relief still removes CGT entirely on your primary home. If you own multiple properties, which property counts as your main residence, and for which periods, can materially change the overall tax position, potentially saving up to 24% in tax on that portion.
Key takeaways for 2026/27
- Basic rate CGT remains at 18%; higher rate at 24% for most assets
- Your annual exemption is £3,000 and cannot be carried forward to future years
- Business Asset Disposal Relief increased to 18% from April 2026
- The frozen exemption combined with higher rates means more gains are taxable
- Spousal transfers, spreading disposals, and loss harvesting are approaches worth exploring
Final thoughts
Capital gains tax is complex, and the changes from April 2026 warrant careful review of your investment strategy. While this article provides an overview of the rates and allowances, your personal tax position depends on your individual circumstances: income level, asset types, investment timeline, and personal objectives. The interaction between your income, gains, and available allowances is unique to each investor.
Working with a tax-savvy financial adviser can help you understand how these changes affect your wealth and explore approaches that align with your goals. For high net worth individuals, the tax savings from structured planning often far exceed the cost of professional advice.
If you're a UK high net worth individual, property investor, or business owner looking to navigate the updated CGT landscape, IFA Connect can help connect you with a tax-specialist financial adviser who understands wealth planning in this environment.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Tax rules can change. For advice tailored to your circumstances, speak with a qualified financial adviser.