Capital Gains Allowance 25/26 Guide

The capital gains tax allowance for the 2025/26 tax year represents a significant consideration for anyone selling assets such as property, shares, or business interests. Understanding how this allowance works and how it affects your tax liability is crucial for effective financial planning. Stewart Accounting helps business owners and individuals across Central Scotland navigate these complex tax matters with clarity and confidence.

What Is the Capital Gains Allowance for 2025/26?

The capital gains tax (CGT) annual exempt amount, commonly known as the capital gains allowance, is the amount of profit you can make from selling assets before you need to pay capital gains tax. For the 2025/26 tax year, the allowance stands at £3,000 for individuals and personal representatives of deceased persons, while trustees have an allowance of £1,500.

This allowance has seen substantial reductions in recent years. Previously set at £12,300 in the 2022/23 tax year, it was reduced to £6,000 in 2023/24 and further halved to £3,000 in 2024/25, where it remains for the 2025/26 tax year. These changes mean that more taxpayers are now subject to capital gains tax on their asset disposals, making careful planning increasingly important.

The allowance applies per individual, so married couples and civil partners can potentially use both allowances by structuring their asset ownership strategically. This can effectively double the tax-free gains to £6,000 between them, though proper legal transfer of assets must be completed before any disposal takes place.

How Do You Calculate Capital Gains Tax in 2025/26?

Calculating your capital gains tax liability involves several steps. First, you determine your total gains by subtracting the original cost of the asset (including purchase costs like legal fees and improvement costs) from the sale proceeds (minus selling costs). If you’ve made losses, these can be offset against gains from the same tax year or carried forward to future years.

Once you’ve calculated your total taxable gains, you deduct your £3,000 annual exempt amount. Any remaining gain is then subject to capital gains tax at rates that depend on your income tax bracket and the type of asset sold.

For most assets, basic rate taxpayers pay 10% CGT on gains that fall within their basic rate band, and 20% CGT on gains above this threshold. Higher and additional rate taxpayers pay 20% on these gains. However, residential property (excluding your main home) attracts higher rates: 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.

It’s important to note that your capital gains are added to your income when determining which tax band applies. If your income plus gains push you into a higher tax bracket, you’ll pay the lower rate on the portion within the basic rate band and the higher rate on the remainder.

What Assets Are Subject to Capital Gains Tax?

Capital gains tax applies to the profit made when you sell or dispose of various assets. The most common chargeable assets include:

• Residential property that isn’t your main home, including buy-to-let properties and holiday homes
• Second homes and investment properties, which are particularly relevant for landlords across Stirling, Alloa, and surrounding areas
• Shares that aren’t held in tax-advantaged accounts like ISAs or pensions
• Business assets, including goodwill and machinery when a business is sold
• Personal possessions worth £6,000 or more, excluding cars
• Cryptocurrency and digital assets

Certain assets and transactions are exempt from capital gains tax. Your main residence typically qualifies for Private Residence Relief, meaning you won’t pay CGT when selling your primary home. Additionally, assets gifted to charities, holdings in ISAs and pensions, UK government gilts, and personal belongings worth less than £6,000 are all exempt.

For business owners, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can reduce CGT to 10% on qualifying business disposals up to a lifetime limit of £1 million, making it an essential consideration when selling a business or business assets.

How Can You Minimize Your Capital Gains Tax Liability?

Strategic planning can significantly reduce your capital gains tax bill. One of the most effective approaches is timing your disposals to spread gains across multiple tax years, allowing you to use your annual exempt amount more than once. For example, if you’re planning to sell shares worth substantially more than £3,000 in profit, selling portions in different tax years can be tax-efficient.

Transferring assets between spouses or civil partners before disposal is another valuable strategy. These transfers don’t trigger capital gains tax and allow couples to utilize both annual exemptions and potentially benefit from different tax rates if one partner is in a lower income bracket.

Using available losses effectively is crucial. Capital losses can be offset against gains in the same tax year, and any unused losses can be carried forward indefinitely. Keeping detailed records of all losses is essential, even if you don’t need to report them immediately.

For property investors in areas like Edinburgh, Glasgow, or Falkirk, considering Private Residence Relief by nominating which property is your main residence (if you own more than one) can provide substantial tax savings. Similarly, letting relief may apply if you’ve let out part of your main home.

Contributing to pensions before disposing of assets can be strategic, as it may reduce your income tax bracket and therefore the rate of CGT you pay. Additionally, maximizing ISA allowances each year shields investment gains from capital gains tax entirely.

When and How Do You Report Capital Gains?

Reporting requirements for capital gains tax have become more stringent. If you sell UK residential property, you must report and pay any CGT due within 60 days of completion using the UK Property Disposal Return, even if the sale ultimately results in no tax liability after reliefs and allowances are applied.

For other chargeable assets, you report capital gains through your Self Assessment tax return for the tax year in which the disposal occurred. The deadline for online tax returns is 31 January following the end of the tax year (so 31 January 2027 for disposals in the 2025/26 tax year).

You must report capital gains even if they’re covered by your annual exempt amount in certain circumstances, particularly if your total proceeds from asset sales exceed four times the annual exempt amount (£12,000 for 2025/26). Failure to report can result in penalties and interest charges.

Keeping accurate records is essential. HMRC recommends retaining documentation for at least five years after the 31 January submission deadline. These records should include purchase and sale contracts, receipts for associated costs, valuations, and calculations of gains or losses.

Why Should You Seek Professional Advice for Capital Gains Planning?

The complexity of capital gains tax rules makes professional guidance invaluable, particularly with the reduced allowance increasing the number of taxpayers affected. An experienced accountant can identify opportunities for tax efficiency that aren’t immediately obvious, potentially saving far more than the cost of their services.

Professional advisors stay current with legislative changes and can ensure you’re claiming all available reliefs, from Business Asset Disposal Relief to Investors’ Relief. They can also help structure transactions in the most tax-efficient manner, whether you’re selling a business in Central Scotland or managing a property portfolio.

For business owners, contractors, and property landlords, integrating capital gains planning with broader tax strategy—including income tax, corporation tax, and inheritance tax considerations—creates a comprehensive approach to wealth management. Preparing for these considerations is critical, and many find that using free MTD software for your business can help keep track of financial data efficiently. Stewart Accounting works with clients across Alloa, Stirling, Falkirk, and throughout Scotland to develop tailored strategies that align with both immediate needs and long-term financial goals.

Early planning is particularly important for significant disposals. Consulting with an accountant well before a planned sale allows time to implement tax-saving strategies, restructure ownership if beneficial, and ensure full compliance with reporting obligations. Such planning can also shed light on potential HMRC tax refund opportunities you might be entitled to.

Conclusion

The capital gains allowance of £3,000 for 2025/26 represents a continued reduction in the tax-free threshold for asset disposals, making effective tax planning more important than ever. Understanding how capital gains tax is calculated, which assets are affected, and the strategies available to minimize your liability empowers you to make informed decisions about your investments and business assets.

Whether you’re a business owner considering selling your company, a property landlord with multiple investments, or an individual managing a share portfolio, proper planning around the capital gains allowance can result in substantial tax savings. Stewart Accounting provides expert guidance to clients throughout Central Scotland and beyond, helping you navigate these complex regulations with confidence and ensuring you retain more of your hard-earned gains. Taking proactive steps now to understand your potential CGT liability and explore available reliefs will position you for optimal financial outcomes in the 2025/26 tax year and beyond.