Autumn Budget: Capital Gains Tax Rates and Annual Exemption Frozen
The Autumn Budget confirmed that the standard Capital Gains Tax (CGT) rates and annual exemptions will remain frozen, continuing the pattern of threshold and allowance freezes across the tax system.
Although no headline rate change was announced, the freeze itself amounts to a long-term tax rise for many individuals and trustees, especially when combined with rising asset values.
Annual Exemption Frozen at £3,000
The CGT Annual Exempt Amount (AEA) will remain at:
- £3,000 for individuals
- £1,500 for most trusts
These figures are exceptionally low by historical standards, significantly increasing the number of people who will pay CGT each year.
This freeze continues until 2031, meaning the real value of the allowance will shrink further over time due to inflation and asset price growth.
Standard CGT Rates Unchanged: 18% and 24%
The Budget confirmed that general CGT rates will remain:
- 18% on gains falling within the unused basic-rate band (residential property)
- 24% on gains above the basic-rate band (residential property)
For other assets:
- 10% for basic-rate taxpayers (non-residential assets)
- 20% for higher/additional-rate taxpayers (non-residential assets)
While rates remain the same, the freeze in thresholds increases the likelihood of more gains falling into higher tax bands, especially as income tax thresholds also remain frozen.
Why the Freeze Matters
Although the government has not increased CGT rates, the freeze means:
- More people will pay CGT, even on modest gains
- Trusts will have even less allowance to work with
- More disposals will fall into higher-rate CGT bands
- Tax bills will rise as asset values increase
- Investors, landlords and trustees may face more frequent reporting obligations
The combination of rising asset prices and frozen allowances creates an effective CGT increase without changing any headline rates.
Who Will Be Most Affected?
This freeze impacts a wide range of taxpayers:
Property owners
Those selling second homes or buy-to-let properties will face higher effective liabilities as little or no gain is shielded by the AEA.
Investors
Individuals with share portfolios, especially outside ISAs, will be at greater risk of annual CGT charges.
Trusts
Trustees lose valuable relief capacity with the £1,500 allowance, increasing administrative and tax burdens.
Business owners
While specific reliefs apply in some cases, the standard CGT freeze still affects disposals outside special relief conditions.
Planning Tips to Reduce CGT Exposure
1. Use the Annual Exemption Every Year
Even at £3,000, using the allowance annually can prevent gains building up unnecessarily.
2. Make Best Use of ISAs and Pensions
Both are outside the scope of CGT.
Transferring or investing through these shelters can eliminate future CGT liabilities.
3. Crystallise Gains Over Multiple Years
Where possible, stagger disposals over tax years to maximise the low exemption.
4. Review Joint Ownership
Transferring assets between spouses or civil partners (tax-free) can:
- Double the AEA
- Use both individuals’ rate bands
- Improve overall tax efficiency
5. Consider Gifting Strategies
Certain lifetime gifting options may reduce future CGT exposure and assist with wider estate planning.
6. Review Trust Structures
Trustees may need to:
- Rebalance portfolios
- Consider distributions
- Review hold/sell timing to minimise annual charges
7. Time Disposals Carefully
Aligning disposals with years of lower income can help reduce the applicable CGT rate.
Summary
The freeze on CGT allowances and standard rates may appear modest, but its long-term impact will be substantial. With the annual exemption stuck at £3,000 for individuals and £1,500 for trusts until 2031, more taxpayers will face CGT liabilities, and more gains will fall into higher-rate bands.
Strategic planning is now more important than ever. Merranti Accounting can help you manage your portfolio, plan disposals and make the most of available reliefs to reduce CGT exposure under the new regime.
