Capital Gains Tax – Reduced Allowances and Updated Rates
Changes to Capital Gains Tax (CGT), originally announced in the Autumn Statement 2022, take full effect in 2024/25.
While CGT rates remain largely unchanged, the annual exempt amount — the tax-free allowance for capital gains — has been substantially reduced, meaning more taxpayers will now be brought into the CGT net.
Annual Exempt Amount – Sharp Reduction
The CGT annual exempt amount has fallen significantly over the past two tax years:
| Tax Year | Annual Exempt Amount |
|---|---|
| 2022/23 | £12,300 |
| 2023/24 | £6,000 |
| 2024/25 | £3,000 |
This means that, for the 2024/25 tax year, individuals can now only realise up to £3,000 of chargeable gains before CGT becomes payable.
For trusts, the exempt amount is halved, to £1,500.
This steep reduction from £12,300 in just two years marks one of the most significant CGT tightening measures in recent memory. It will lead to:
- Higher CGT bills for those selling assets such as shares or property; and
- More individuals needing to file a Self Assessment tax return to report their gains.
Current CGT Rates
The main rates of CGT remain unchanged for most assets:
- 10% for basic rate taxpayers;
- 20% for higher and additional rate taxpayers.
These rates apply to gains on general assets, such as shares, investment funds, or business assets (unless covered by specific reliefs such as BADR).
Residential Property Gains – Rate Reduction from April 2024
A separate, higher CGT rate applies to disposals of chargeable residential property, including:
- Second homes;
- Buy-to-let rental properties; and
- Holiday homes.
From 6 April 2024, the higher rate of CGT on residential property has been reduced from 28% to 24%, while the lower rate remains at 18% for gains falling within an individual’s basic rate band.
The Chancellor explained that this cut aims to stimulate activity in the property market — particularly among landlords and second-home owners who may have delayed sales due to the higher tax rate.
The Treasury forecasts that the lower 24% rate will actually increase overall CGT receipts, by encouraging more taxpayers to realise and report their gains.
Example: Residential Property Disposal
Emma, a higher-rate taxpayer, sells a second home in June 2024, realising a gain of £80,000.
Her annual exempt amount for 2024/25 is £3,000, leaving £77,000 taxable.
Under the new 24% rate:
- Her CGT liability is £18,480 (£77,000 × 24%).
If she had sold the same property before 6 April 2024, the tax would have been £21,560 (£77,000 × 28%).
✅ Saving: £3,080, purely due to the rate reduction.
More Taxpayers Brought Into Scope
The sharp reduction in the exempt amount means that many more people will now need to report and pay CGT — even on relatively modest disposals.
For example:
- A small shareholding gain of £5,000 would previously have been covered by the £6,000 (2023/24) exemption,
- But now, with a £3,000 limit, £2,000 becomes taxable.
Even if the gain is small, it still must be reported if total disposal proceeds exceed £50,000 in the tax year.
This means more taxpayers — particularly casual investors or second-home owners — will now need to complete the CGT pages of a Self Assessment return.
Importance of Accurate Record-Keeping
With the lower exempt amount, keeping accurate cost records is now more important than ever.
Taxpayers need to maintain documentation of:
- Original purchase costs,
- Enhancement expenditure (e.g. property improvements),
- Acquisition and sale costs (legal, agent, and professional fees).
For older holdings — such as long-held shares or inherited property — these records can be difficult to locate.
HMRC may still require evidence of cost to support your CGT calculation, even if the gain appears small.
Other Points to Note
- The CGT payment window for UK residential property remains 60 days from completion of the sale.
Tax must be reported and paid online via HMRC’s UK Property Reporting Service. - The 30-day deadline that previously applied to disposals before October 2021 is no longer in force.
- Gains on main residences (your principal private home) remain exempt under Principal Private Residence Relief (PPR), provided occupation conditions are met.
Planning Opportunities
With a lower exemption and unchanged rates on general assets, tax planning around CGT has become more important. Possible strategies include:
- Timing disposals across multiple tax years to use the annual exemption more than once.
- Offsetting losses against gains to reduce taxable amounts.
- Transferring assets between spouses or civil partners, where appropriate, to utilise two annual exemptions and lower-rate bands.
- Considering ISAs or pension investments for future investments, which shelter gains from CGT altogether.
As with any tax planning, the suitability of these steps depends on your personal circumstances.
In Summary
| Key Aspect | 2023/24 | 2024/25 |
|---|---|---|
| Annual Exempt Amount | £6,000 | £3,000 |
| Main CGT Rates | 10% / 20% | 10% / 20% |
| Residential Property Rates | 18% / 28% | 18% / 24% |
| Payment Deadline (Residential) | 60 days | 60 days |
How Merranti Can Help
If you are planning to sell property, shares, or other investments, or are unsure whether your disposal will trigger a CGT liability, contact Merranti Accounting for advice.
We can help you:
- Calculate your potential CGT exposure,
- Review whether any reliefs or losses can reduce your tax bill, and
- Ensure your reporting to HMRC is accurate and timely.
With more taxpayers now within the CGT system and a reduced exemption, careful planning and good record-keeping are more important than ever.
