Capital Gains Tax in 2026-27: Rates, Allowances and Planning After the BADR Increase

Key takeaway

For 2026-27, capital gains are taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers — the rates doubled from 10%/20% at the October 2024 Budget. The annual exempt amount remains £3,000. Business Asset Disposal Relief (BADR) now applies at 18% (up from 14% in 2025-26 and 10% before that), meaning BADR's only remaining benefit is for higher and additional-rate taxpayers, who still save 6% on up to £1 million of qualifying gains. Thoughtful timing, spousal transfers, loss offsetting and qualifying-investment structuring are now more valuable than ever.

Detailed explanation

Capital Gains Tax (CGT) is charged when you dispose of a chargeable asset for more than you paid for it — covering shares, second homes, business assets and most investment property. Your main residence is generally exempt under Private Residence Relief.

CGT rates 2026-27

Income band	CGT rate
Basic rate taxpayer	18%
Higher / additional rate taxpayer	24%

The rate you pay depends on where the gain falls within your income bands, not simply your top rate — gains are treated as the top slice of income.

Annual exempt amount

The tax-free annual allowance is £3,000 for individuals (down from £6,000 in 2023-24 and £12,300 before that). It is frozen at this level. Married couples and civil partners each have their own allowance, so up to £6,000 of gains can be sheltered each year.

Business Asset Disposal Relief (BADR)

BADR (formerly Entrepreneurs' Relief) applies a 10% rate historically, but this has been increasing:

Tax year	BADR rate
Up to 5 April 2025	10%
2025-26	14%
2026-27 onwards	18%

The lifetime limit is £1 million of qualifying gains. Crucially, with the main CGT rate now at 18%/24%, BADR at 18% means there is no benefit for basic-rate taxpayers — the relief only helps higher and additional-rate taxpayers, saving them 6% (24% − 18%) on up to £1 million (maximum saving £60,000).

Investors' Relief

Investors' Relief, which applies to certain externally-held ordinary shares, saw its lifetime limit cut from £10 million to £1 million from October 2024 and its rate increase to 18% alongside BADR.

Property gains

Gains on second homes and buy-to-let property are taxed at the 18%/24% rates. The Private Residence Relief rules mean that, for a property that was once your main home, the final 9 months of ownership are deemed occupied even if you weren't living there. Letting Relief was abolished for disposals from April 2020 except in narrow circumstances.

Legislation

CGT is charged under the Taxation of Capital Gains Act (TCGA) 1992. The 18%/24% rates took effect for disposals on or after 30 October 2024 under the Finance (No. 2) Act 2024. BADR is at TCGA s169I onwards; the staged rate increases were announced at the October 2024 Budget. The £3,000 annual exempt amount is set by FA 2024. Reporting and payment of CGT on UK residential property within 60 days is under Schedule 2 FA 2019.

Practical example

A higher-rate taxpayer selling a business for £2 million with a £1.5 million gain in 2026-27, qualifying for BADR, would pay:

• £3,000 annual exemption (0%)
• £1,000,000 at BADR rate of 18% = £180,000
• £497,000 at 24% = £119,280
• Total CGT: approximately £299,280

Had the sale completed before 6 April 2025 when BADR was 10%, the tax would have been roughly £140,000 — so the phased increases have added almost £160,000 to a mid-sized business sale.

By contrast, deferring part of the gain via an EMI option held for two years could qualify it for BADR even where other planning is limited, and transferring shares to a spouse before sale can utilise their £3,000 allowance and potentially lower their marginal rate.

Common mistakes

1. Assuming BADR still halves your CGT bill. At 18%, BADR now only helps higher/additional-rate taxpayers — and only by 6%.
2. Missing the 60-day reporting deadline on residential property. Gains on second homes and buy-to-lets must be reported and the tax paid within 60 days of completion via the UK Property Return.
3. Overlooking the final-9-months relief. Many sellers under-claim Private Residence Relief by not counting the final period of deemed occupation.
4. Failing to offset losses. Current-year capital losses must be set against gains before the annual exemption is applied; unrelieved losses can also be carried back against gains from the previous year.
5. Timing disposals across the tax year boundary. With the BADR rate having stepped up on 6 April 2026, accelerating a qualifying business sale into 2025-26 (at 14%) rather than 2026-27 (at 18%) was worth up to £40,000 on a £1m gain — illustrating how timing matters.

How Newshams can help

Newshams Tax Advisers advises on the full range of CGT planning — business sales and BADR qualification, share disposals, property gains and 60-day reporting. We work with owners, founders and investors to time and structure disposals efficiently within the current rate regime. Contact us on +44 (0) 800 211 8657 or enquiries@newshams.com.