Capital Gains Tax Annual Exempt Amount in 2025/26: When the £3,000 Allowance Applies

Capital Gains Tax (CGT) is often only considered when an asset is sold, gifted, or transferred. For many people, it comes into play unexpectedly — particularly where investments, second properties, or long-held assets are involved.

One of the key features of the CGT system is the annual exempt amount, which allows individuals to realise a certain level of capital gains each tax year without paying Capital Gains Tax.

For the 2025/26 tax year, the CGT annual exempt amount remains at £3,000. While this is significantly lower than it was in previous years, it can still play an important role in managing tax exposure if used correctly.

In this post, we explain how the £3,000 allowance works, who can use it, what it applies to, and when timing and planning become important.

What Is the Capital Gains Tax Annual Exempt Amount?

The CGT annual exempt amount is a tax-free allowance that applies to capital gains, not to income.

It allows each individual to make up to £3,000 of capital gains per tax year without paying Capital Gains Tax.

Key points:

• The allowance is £3,000 per individual, per tax year
• It applies to total net gains, not to each asset
• It cannot be carried forward or transferred
• If unused, it is lost at the end of the tax year

Once total gains exceed the allowance, CGT is charged on the excess.

What Counts as a Capital Gain?

A capital gain usually arises when you dispose of an asset for more than you paid for it. A “disposal” includes more than just a sale.

Common examples include:

• Selling shares or investment funds
• Selling a second property or buy-to-let
• Gifting assets to someone other than a spouse or civil partner
• Transferring assets at undervalue
• Selling valuable personal possessions (chattels)

Capital Gains Tax does not usually apply to the sale of your main home, provided it qualifies fully for Private Residence Relief.

Who Can Use the £3,000 Allowance?

You can use the CGT annual exempt amount if:

• You are an individual (not a company)
• You make a capital gain during the tax year
• The asset disposed of is not fully covered by another relief

Each individual is entitled to their own £3,000 allowance, which means married couples and civil partners may each be able to use an allowance — depending on ownership and circumstances.

How the £3,000 Allowance Works in Practice

The allowance applies to your net gains for the tax year.

This means:

1. You calculate the gain (or loss) on each disposal

2. You offset any capital losses made in the same year

3. You then apply the £3,000 exemption to the remaining gain

Only the amount above £3,000 is subject to CGT.

Example 1: Gains Below the Allowance

You sell shares and realise a gain of £2,500 during the tax year.

• Total gains: £2,500
• Annual exempt amount: £3,000

Result:
No Capital Gains Tax is due, and the gain is fully covered by the allowance.

Example 2: Gains Above the Allowance

You sell an investment property and realise a gain of £18,000.

• Total gains: £18,000
• Annual exempt amount: £3,000
• Taxable gain: £15,000

Capital Gains Tax is charged only on the £15,000 excess, not on the full gain.

Example 3: Using Losses and the Allowance Together

You make:

• A gain of £10,000 on shares
• A loss of £4,000 on another investment

Net gain:

• £10,000 – £4,000 = £6,000

Apply the annual exempt amount:

• £6,000 – £3,000 = £3,000 taxable

This illustrates how losses and the allowance work together to reduce exposure.

Married Couples and Civil Partners

Transfers of assets between spouses or civil partners are generally no-gain, no-loss for CGT purposes.

This means it is often possible to:

• Reallocate ownership of assets
• Use two annual exemptions instead of one

For example, where an asset is jointly owned or ownership is adjusted before disposal, each person may be able to use their own £3,000 allowance.

The timing and legal ownership matter, so this should be considered in advance of a sale.

Why Timing Matters More Than Ever

Because the annual exempt amount is relatively small, timing disposals across tax years can make a meaningful difference.

For example:

• Selling assets before and after 5 April may allow the use of two allowances
• Spreading disposals can reduce the amount taxed in any one year
• Using allowances efficiently can reduce overall CGT, even if rates remain the same

Once the tax year ends, unused allowance cannot be recovered.

Interaction With Income Tax Bands

Capital Gains Tax rates depend on your income tax position.

Capital gains sit on top of your taxable income, which means:

• Some gains may be taxed at lower CGT rates
• Others may be taxed at higher rates once income bands are exceeded

While the annual exempt amount reduces the taxable gain, it does not affect which rate applies to the remaining amount. This is why CGT planning often involves looking at income and gains together.

When You Still Need to Report Gains

Even if no CGT is payable, you may still need to report a disposal if:

• Total proceeds exceed certain limits
• You have already filed a Self Assessment return
• The disposal involves UK residential property (which has separate reporting rules)

This is an area where people often assume “no tax means no reporting”, which isn’t always the case.

Common Misunderstandings

Some frequent areas of confusion include:

• Thinking the £3,000 applies per asset rather than per person
• Assuming unused allowance can be carried forward
• Believing the allowance reduces tax rates (it reduces the gain, not the rate)
• Forgetting to offset losses before applying the exemption

Understanding the order in which gains, losses, and allowances apply is key.

Summary

For the 2025/26 tax year, the Capital Gains Tax annual exempt amount remains at £3,000.

You should consider it carefully if:

• You are planning to sell investments or property
• You expect to realise a gain close to or above £3,000
• You have losses that could be offset
• You are selling assets jointly or as a couple

Although the allowance is smaller than in the past, it can still make a difference — particularly when combined with careful timing and an understanding of how gains interact with income.

If you’re considering a disposal or have already sold an asset and want to understand how Capital Gains Tax applies to you, a short discussion can often clarify your position quickly. You can book a free 30-minute call to talk through your situation, check how the £3,000 allowance applies, and understand what to expect before or after a sale.