Every individual can make up to £3,000 of capital gains tax-free each year, but use it or lose it: the allowance cannot be carried into the next year.
The CGT allowance, properly called the annual exempt amount, is the slice of capital gains you can pocket each tax year before Capital Gains Tax bites. For 2025/26 it is just £3,000 per person. That sounds generous until you remember it was £12,300 as recently as 2022/23, before being cut to £6,000 and then halved again. The shrinking allowance is quietly pulling far more sellers into the CGT net.
The allowance is applied after you have netted your gains against any allowable losses for the year. Only the amount above £3,000 is taxable. The rate then depends on which Income Tax band the gain falls into: 18% within your basic-rate band and 24% above it for most assets in 2025/26.
Critically, the allowance resets each 6 April and any unused portion vanishes. There is no carry-forward, unlike capital losses, which can be carried forward indefinitely once reported to HMRC. That asymmetry is the heart of CGT planning: you want to use your £3,000 every year you can.
Imagine Priya wants to sell shares standing at a £10,000 gain. As a higher-rate taxpayer she would pay 24% CGT.
Selling all at once in 2025/26: Gain £10,000, minus the £3,000 allowance = £7,000 taxable. CGT at 24% = £1,680.
Spreading across two tax years: She sells half before 5 April 2026 (gain £5,000) and half after 6 April 2026 (gain £5,000). Each year she uses a fresh £3,000 allowance, so only £2,000 is taxable each year. CGT becomes £2,000 × 24% = £480 per year, totalling £960.
By straddling the tax-year boundary, Priya saves £720. If she instead transferred half the shares to her spouse first, both could use a £3,000 allowance in the same year, sheltering £6,000 of the gain and cutting the bill further. Our Capital Gains Tax calculator lets you model both routes.
When the allowance was £12,300, a typical small share or property gain often fell entirely within it. At £3,000, that cushion is gone. Three tactics matter most:
For a full picture of how the gain itself is calculated and taxed, see our guide to Capital Gains Tax.
A £3,000 allowance with no carry-forward turns CGT into an annual use-it-or-lose-it decision. The investors who win are the ones who harvest gains every single year.
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