Question 1

What is the current Capital Gains Tax rate in the UK?

Accepted Answer

undefined CGT rates were reformed in the Autumn Budget 2024. The lower and higher rates were aligned: 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers. This means residential property and other chargeable assets now share the same rates. The annual exempt amount is £3,000 for 2026-27. BADR provides a significant reduction — 18% on qualifying business disposals from April 2026 (up from 10% before April 2025 and 14% in 2025-26). Relevant legislation: TCGA 1992 s.4 (rates). FA 2024 s.15 (property rate alignment to 24%). BADR: TCGA 1992 s.169I. Annual exempt amount: TCGA 1992 s.3.. Example: A higher-rate taxpayer selling shares with a £50,000 gain pays £11,280 CGT (£47,000 at 24% after the £3,000 annual exemption). With BADR, it's £8,460 (£47,000 at 18%). Common mistake: Assuming CGT rates are the same as income tax rates. CGT is a separate tax with its own rates (18%/24%), which are lower than the top income tax rates (45%). This is why converting income to capital gains (e.g., through dividends from a company sale) can be tax-efficient.

Question 2

How much is the CGT annual exemption for 2026-27?

Accepted Answer

undefined The annual exempt amount (AEA) is the amount of capital gains you can realise each tax year without paying CGT. It's been heavily reduced: £12,300 (2022-23) → £6,000 (2023-24) → £3,000 (2024-25 onwards). For married couples, each spouse has their own £3,000 allowance, so a couple can realise £6,000 of gains tax-free per year. The exemption is per tax year (ending 5 April) and cannot be carried forward. Effective planning means making disposals each year to use the allowance — particularly through bed-and-ISA transactions. Relevant legislation: TCGA 1992 s.3 — annual exempt amount. The amount is set annually by statutory instrument.. Example: A couple with a £12,000 unrealised gain in shares sold half each, using both annual exemptions (£6,000 total). CGT: £0. Without planning, selling all in one name would have cost £1,440 at 24%. Common mistake: Not using the annual exemption because the gain seems too small. Even £3,000 of gains saves £720 per person per year at 24%. Over 10 years, that's £7,200 per person — £14,400 per couple. The exemption is lost forever if unused.

Question 3

What is Business Asset Disposal Relief (BADR) and how do I qualify?

Accepted Answer

undefined BADR is the most valuable CGT relief for business owners. On a £1M gain, it reduces CGT from £240,000 (24%) to £180,000 (18%) — a saving of £60,000 (from April 2026). The qualifying conditions for shares in a personal company are strict: (1) the company must be a trading company (or holding company of a trading group); (2) you must be an officer (director/secretary) or employee; (3) you must hold at least 5% of the ordinary share capital by nominal value AND 5% of voting rights; AND (4) either 5% of economic entitlement to profits/assets on winding up, OR 5% of proceeds on a company sale. All conditions must be met throughout a continuous 2-year period ending on the date of disposal. EMI option shares qualify after just 1 year, not 2. Relevant legislation: TCGA 1992 s.169I — BADR qualifying conditions. s.169I(6) — personal company test. s.169I(7) — trading company requirement. Rate changes: FA 2024-25.. Example: A founder selling company shares with a £900,000 gain before April 2025 paid £90,000 CGT (10% BADR). The same sale after April 2026 costs £162,000 (18% BADR) — a difference of £72,000. Common mistake: Not checking the trading company status. Many companies have mixed trading and investment activities — if non-trading activities are substantial (20-30% rule of thumb), HMRC may deny BADR. Always get specialist advice before a business sale to verify BADR eligibility and, if necessary, restructure the company.

Question 4

Do I pay Capital Gains Tax when selling my main home?

Accepted Answer

undefined PPR relief is the most valuable CGT relief for homeowners. If the property has been your main home throughout your ownership, the entire gain is exempt — no CGT. Even if you haven't lived there for the entire period, the final 9 months are always exempt, and certain periods of absence (working abroad up to 3 years, any reason up to 3 years if you lived there before and after) can count as occupation. If you own two or more properties, you can elect which is your main residence within 2 years of acquiring the second property — this can be varied to build up exempt periods on both properties. Without an election, HMRC decides based on the facts. Relevant legislation: TCGA 1992 s.222-226 — Principal Private Residence relief. s.223 — final 9-month exemption. s.222(5)-(10) — main residence election.. Example: A client sold their home of 20 years for £500,000 more than they paid. Full PPR relief applied — £0 CGT. Without the relief, the CGT would have been £119,280 (£497,000 at 24%). Common mistake: Not making a main residence election when owning two properties. Without an election within 2 years, HMRC determines your main residence based on facts — which may not be the property with the larger gain. This mistake can cost tens of thousands of pounds.

Question 5

How do I report and pay CGT on property?

Accepted Answer

undefined Since 6 April 2020, CGT on UK residential property has a strict 60-day reporting and payment deadline. Within 60 days of the property completion date, you must: (1) calculate the gain and applicable CGT; (2) report it via HMRC's online property CGT service; (3) pay the CGT due. The gain is then also reported on your Self Assessment tax return at year-end. If the 60-day estimate was too high, you'll get a refund; if too low, you'll pay the balance. For non-property assets (shares, business assets, etc.), CGT is reported and paid through Self Assessment — due by 31 January after the end of the tax year in which the disposal occurred. Relevant legislation: FA 2019 Sch.2 — 60-day reporting for residential property CGT. TMA 1970 s.12Z — penalties for late returns. Self Assessment: TMA 1970 s.9.. Example: A client sold a buy-to-let on 1 March. The 60-day deadline was 30 April. We calculated the CGT, reported online on 15 March, and paid the £22,000 liability — well within the deadline, avoiding penalties. Common mistake: Waiting until Self Assessment to report property CGT. The 60-day deadline is strict and separate. Missing it triggers a £100 penalty, increasing to £300 after 6 months and £1,200 or 100% of the tax due after 12 months.

Question 6

Can I reduce CGT by transferring assets to my spouse?

Accepted Answer

undefined Spouse transfers are one of the simplest and most effective CGT planning tools. When you transfer an asset to your spouse or civil partner, it's treated as a disposal at a price that produces neither a gain nor a loss — meaning no CGT is due on the transfer itself. Your spouse takes your original cost base. When they eventually sell the asset, the gain is calculated from the original cost, but it's their annual exemption and tax rate that apply. This is particularly powerful when one spouse is a higher-rate taxpayer (24% CGT) and the other is a basic-rate taxpayer (18% CGT) or a non-taxpayer. By transferring assets to the lower-earning spouse before selling, the gain may be taxed at 18% instead of 24% — or even 0% if within their unused personal allowance. Relevant legislation: TCGA 1992 s.58 — transfers between spouses/civil partners are on a no-gain/no-loss basis. s.60 — the receiving spouse takes the transferor's cost base.. Example: A higher-rate husband with a £10,000 gain on shares transferred half to his wife (basic-rate taxpayer). He sold his half: £5,000 gain, minus £3,000 exemption = £2,000 at 24% = £480 CGT. She sold hers: £5,000 gain, minus £3,000 exemption = £2,000 at 18% = £360 CGT. Total: £840 (vs £1,680 if sold entirely by him). Saving: £840. Common mistake: Transferring shares to a spouse who is already a higher-rate taxpayer. The transfer still doubles the annual exemption, but doesn't reduce the rate — both pay 24%. The real benefit comes when the spouse is in a lower tax band.

Question 7

What is CGT holdover relief and when does it apply?

Accepted Answer

undefined Holdover relief under TCGA 1992 s.165 allows you to gift qualifying business assets without an immediate CGT charge. The gain is deferred — it's deducted from the recipient's cost base when they eventually dispose of the asset. This is valuable for succession planning: you can pass a business to the next generation without triggering a CGT bill you can't pay (because you haven't received any cash). The relief applies to: (1) business assets used in a trade; (2) shares in unquoted trading companies; (3) agricultural land; (4) certain shares in quoted trading companies where you have at least 5%. There's also a separate holdover relief (s.260) for gifts into discretionary trusts, but this defers the gain rather than eliminating it — and may trigger an IHT entry charge. Relevant legislation: TCGA 1992 s.165 — holdover relief on gifts of business assets. s.260 — holdover relief on gifts into trust. s.169L — qualifying conditions.. Example: A client gifting shares in their trading company (worth £500,000, cost £100,000) to their child used holdover relief. No CGT was due on the gift. The child's cost base was £100,000 (the original cost). When the child eventually sells the shares, the gain will be calculated from £100,000 — but if they qualify for BADR, the rate will be 18%. Common mistake: Assuming holdover relief eliminates the gain. It defers it — the recipient inherits the original cost base and pays the CGT when they sell. It's also easy to miss the claim deadline: holdover relief must be claimed by the first 31 January after the tax year of the gift (via Self Assessment).

Question 8

How does CGT interact with EIS and SEIS investments?

Accepted Answer

undefined EIS and SEIS provide multiple tax reliefs. For CGT specifically: (1) CGT deferral relief — if you have a capital gain, you can reinvest the gain in EIS-qualifying shares within 3 years (1 year before to 3 years after the gain). The original gain is deferred until you sell the EIS shares. If you hold EIS shares for 3+ years, there's no CGT on any gain on the EIS shares themselves — the entire growth is tax-free. SEIS offers 50% income tax relief on up to £200,000 invested per year, plus CGT exemption on disposal after 3 years, plus CGT reinvestment relief (50% of the reinvested gain is exempt). These reliefs are subject to caps and conditions, and carry investment risk — EIS/SEIS shares are in early-stage companies. Relevant legislation: TCGA 1992 s.150 — EIS CGT deferral relief. s.150A — conditions for deferral. TCGA 1992 s.155 — no CGT on EIS shares held 3+ years. ITA 2007 Part 5 (EIS) and Part 6 (SEIS) — income tax relief.. Example: A client with a £100,000 capital gain reinvested it in EIS shares within 1 year. The £100,000 gain was deferred — no CGT due now. After 3 years, the EIS shares had grown to £130,000. On selling the EIS shares, the original £100,000 deferred gain became due, but the £30,000 growth on the EIS shares was tax-free. If the EIS shares had been lost (company failed), income tax relief of up to 45% would have partially offset the loss. Common mistake: Not realising that CGT deferral requires reinvestment of the gain, not just the proceeds. Also, EIS shares must be held for 3 years to qualify for CGT exemption — selling within 3 years triggers the deferred CGT plus potential income tax relief clawback.

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