CGT allowance cut from £12,300 to £3,000: What it means for your investments

If you sell investments that have increased in value, you may have to pay Capital Gains Tax (CGT) on the profit you make.

It applies to both individuals and businesses.

It’s important to remember that you don’t pay tax on the amount you sell an investment for: you only pay tax on the gain.

For example:

• If you buy shares for £10,000
• And a few years later, you sell them for £18,000

You haven’t made £18,000. You’ve made an £8,000 gain. Therefore, it’s this £8,000 that Capital Gains Tax is applied to.

The most common assets that can be attract CGT include:

• Shares (but only those held outside an ISA or pension)
• Investment funds and ETFs (but only those held outside an ISA or pension)
• A second home (or buy-to-let property)
• Business assets (if you’re self-employed or own a business)
• Valuable personal possessions (worth more than £6,000, such as jewellery, antiques or works of art, with some exceptions)
• Cryptocurrencies (such as Bitcoin or Ethereum)

CGT is not usually charged on:

• Your main home (provided it qualifies for Private Residence Relief)
• Investments held inside an ISA
• Investments held inside a pension
• Cash savings
• Premium Bonds
• Most personal belongings worth £6,000 or less
• Your car

CGT isn’t only triggered by selling something. It can also apply if you:

• Give an asset away (unless it’s to your spouse or civil partner in most cases)
• Exchange one asset for another (for example, swapping one cryptocurrency for another)
• Receive compensation for the loss of an asset

No.

Each person has an annual Capital Gains Tax allowance.

This is the amount of gains you can usually make each tax year before Capital Gains Tax may become payable.

For the 2026/27 tax year, the Capital Gains Tax (CGT) annual exempt amount is £3,000 for individuals.

This means you can usually make up to £3,000 of taxable gains each tax year before Capital Gains Tax becomes payable.

What’s changed?

Until April 2023, most people could make £12,300 of gains per year before CGT was due.

However, in 2023, the annual Capital Gains Tax allowance was cut to £6,000, and in April 2024, it was slashed even further, down to £3,000.

That’s a reduction of more than 75%!

When the allowance was £12,300, many everyday investors never came close to using it.

Now that it’s £3,000, many more people are finding themselves owing Capital Gains Tax.

Imagine you invested £20,000 several years ago and it’s now worth £25,500. If you sold the entire investment, your gain would be £5,500. Under the old £12,300 allowance, there would have been no Capital Gains Tax to pay. Under today’s £3,000 rule, part of that gain is now taxable.

Many chargeable investments can be transferred between spouses or civil partners in this way.

This includes shares, investment funds and many other investments held outside an ISA or pension.

However, investments already held inside an ISA or pension can’t simply be transferred to your spouse.
These accounts belong to the individual account holder.

Yes, there are several legitimate ways to reduce or avoid Capital Gains Tax where appropriate.

These include:
Investing through an ISA where possible

Making use of both spouses’ or civil partners’ CGT allowances
Spreading sales across more than one tax year
Offsetting investment losses against gains, where the rules allow

The key with all of these is planning ahead.

Should you sell investments before they grow further?

Not necessarily. Be very careful about making investment decisions purely for tax reasons, because selling a good investment simply to avoid tax could end up costing more in the long run.

Instead, think about Capital Gains Tax as one factor among many, alongside your investment goals, diversification and overall financial plan

Capital Gains Tax (CGT): A tax you may pay on the profit you make when selling certain investments or assets.
Capital gain: The profit you make when you sell an investment for more than you paid for it.

CGT allowance: The amount of profit you can usually make each tax year before Capital Gains Tax may apply.

ISA (Individual Savings Account): A tax-efficient account where investment growth is generally free from Capital Gains Tax and Income Tax.

Pension: A long-term savings account for retirement where investments can usually grow free from Capital Gains Tax.