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Following recent increases in Capital Gains Tax (CGT) rates, the amount the government collects from this tax has risen. According to the BBC, revenue from CGT reached nearly £17 billion in January 2026 – 69% higher than in January 2025.
Unfortunately, CGT can significantly impact your investment returns. While you can’t avoid paying it altogether, careful planning could help you manage your CGT bill, leaving you with more of your wealth to spend on the things you enjoy.
Read on to learn how CGT works and discover four clever strategies for reducing your liability.
Capital Gains Tax is a tax on the profit you make when you sell or “dispose” of an asset
If you sell an asset that has increased in value, you might have to pay CGT on gains you make.
“Chargeable assets” include:
- Personal possessions worth £6,000 or more
- Property that is not your main home (or your main home if you rent it out or use it for business)
- Shares and investments held outside a tax-free wrapper, such as an ISA
- Business assets and cryptoassets.
In the 2026/27 tax year, you can make up to £3,000 profit before CGT is due. This is known as your Annual Exempt Amount.
You do not usually have to pay CGT on assets you give to your spouse, civil partner, or a registered charity.
Managing Capital Gains Tax has become more challenging in recent years
The previous government cut the annual CGT allowance from £12,300 to £6,000 in 2023/24, and again to £3,000 for 2024/25.
In her Autumn 2024 Budget, Chancellor Rachel Reeves confirmed that the Annual Exempt Amount would remain unchanged at £3,000. However, she also confirmed an increase in the rate of CGT, which took effect from 30 October 2024.
For basic-rate taxpayers, CGT increased from 10% to 18%, and for higher- and additional-rate taxpayers, it rose from 20% to 24%.
Moreover, the chancellor announced several changes in her Autumn 2025 Budget that could affect your CGT liability if you’re a business owner, including:
- CGT relief for business owners selling qualifying assets to Employee Ownership Trusts was reduced from 100% to 50%, from 26 November 2025.
- The CGT rate for Business Asset Disposal Relief and Investors’ Relief increased from 10% in 2024/25 to 18% from 6 April 2026.
4 clever ways to reduce a potential Capital Gains Tax bill
Efficient planning can make a big difference to your CGT liability. Here are four strategies that could help you manage your wealth tax-efficiently:
1. Make full use of your annual ISA allowance
In the 2026/27 tax year, the annual ISA allowance is £20,000. Any gains or income you earn inside an ISA are exempt from CGT (there’s no Income Tax or Dividend Tax to pay either). Moreover, if you have a spouse or civil partner, you could combine your ISA allowances and save or invest up to £40,000 tax-efficiently.
You can’t roll over any unused ISA allowance to the new tax year, so you’ll need to “use it or lose it” by midnight on 5 April.
2. Top up your pension
You could receive between 20% and 45% tax relief on contributions to your pensions, depending on your income. What’s more, growth within pensions is generally tax-free; you don’t pay Income Tax or CGT on investment returns.
As such, you might want to consider increasing your pension contributions to shield more of your wealth from CGT over the long term.
If you’re selling a business, redirecting some of the profits into pension contributions (or ISAs) could ensure that future growth is sheltered from CGT. This may offset the financial impact of less generous Business Asset Disposal Relief and Investors’ Relief.
Be aware that the Annual Allowance limits the total you can pay into your pensions each tax year while still receiving tax relief and without incurring additional tax charges. This includes contributions made by you, your employer, and third parties.
In the 2026/27 year, the Annual Allowance is £60,000 for most people, but yours could be lower if you’ve already flexibly accessed your pension or your income exceeds certain thresholds. Also, you can only claim tax relief on up to 100% of your annual earnings.
The Annual Allowance can be “carried forward” for up to three tax years. So, you have until 5 April 2027 to use your allowance from 2023/24.
3. Use your full CGT allowance each year
You can’t carry forward your £3,000 (2026/27) Annual Exempt Amount into the next tax year, so it’s worth making full use of it before 6 April.
If you’re planning to dispose of an asset that would exceed this allowance, consider spreading the sale over multiple tax years. This could allow you to reduce or eliminate your CGT bill by keeping your annual gains under the threshold.
If you’re a business owner, using your Annual Exempt Amount for small disposals could help you preserve the use of the Business Asset Disposal Relief and Investors’ Relief for the main business sale.
4. Transfer assets to your spouse or partner
Remember that transfers between spouses and civil partners are normally CGT-free. As such, you could reduce the amount of tax you pay as a couple by taking full advantage of your individual allowances.
For example, if you’ve used up your Annual Exempt Amount for the current tax year, you could transfer any chargeable assets to your partner before disposing of them to make use of their allowance too.
Equally, if your spouse or partner pays a lower rate of Income Tax than you, transferring assets to them could reduce your shared CGT bill.
Get in touch
If you’d like help planning how to sell assets as tax-efficiently as possible, we’d love to hear from you.
Please get in touch by emailing hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Approved by Best Practice IFA Group Ltd on 13/4/26