Raising of Capital Gains Tax, effective from Autumn Budget 2024
UK Capital Gains Tax Rates for 2025/26: A Comprehensive Guide
The UK government has announced the capital gains tax (CGT) rates for the 2025/26 tax year, providing clarity for individuals and businesses planning their investments and sales of assets. Here's a breakdown of the key changes:
Current CGT Rates for 2025/26
For the upcoming tax year, the CGT rates for various assets are as follows:
- For residential property sales, basic-rate taxpayers will pay 18%, while higher/additional-rate taxpayers will pay 24%.
- For shares, funds, and other non-property assets, the rate depends on when the sale occurs:
- Before 30 October 2024: basic-rate taxpayers will pay 10%, and higher-rate taxpayers will pay 20%.
- From 30 October 2024 onwards: basic-rate taxpayers will pay 18%, and higher-rate taxpayers will pay 24%.
It is important to note that the tax band threshold defining basic vs. higher rate aligns with income tax bands. Basic rate applies if your total income plus gains remain within £12,571 to £50,270, above which higher/additional rates apply (24%).
CGT Allowance for 2025/26
The annual CGT allowance for individuals in 2025/26 is reduced to £3,000, down from £6,000 in the previous year. This means that gains up to this amount are tax-free.
Upcoming Changes to CGT Rates
From 6 April 2026, the lower rate of CGT for business asset disposal relief and investors' relief will match the main lower rate of CGT (18%). This means a rise for these reliefs, as they will eventually reach 14%.
The Budget for 2025 includes £40 billion worth of tax rises, with CGT being one of the affected areas. However, CGT rates on property sales remain the same at 18% and 24% respectively.
Impact of Higher CGT Rates
The increase in CGT rates may have several implications. For instance, it could potentially discourage risk-taking and investing in shares, potentially depriving consumers of higher long-term returns. Business owners may also take a dim view of the changes, as they now face higher rates of CGT.
Exemptions and Reliefs
Residential property gains are subject to specific reliefs like Private Residence Relief and Letting Relief, which can reduce the chargeable gain. It is crucial to understand these reliefs when calculating your CGT liability.
Investing through a stocks and shares ISA can avoid capital gains tax completely. This makes ISAs an attractive option for those looking to minimise their tax liability.
Paying CGT
Tax on UK residential property sales must be paid within 60 days of sale; for other assets, it’s usually settled via self-assessment by 31 January following the tax year.
In summary, the 2025/26 tax year will see changes to the CGT rates for business asset disposal relief and investors' relief, with these rates eventually reaching 14%. Sharing assets with a spouse who is in a lower tax bracket may help limit CGT exposure. It is crucial to understand these changes and plan your investments and sales accordingly.
- Understanding the upcoming changes in personal finance, individuals planning their investments might want to know that the lower rate for business asset disposal relief and investors' relief will match the main lower rate of CGT (18%) from 6 April 2026, rising to 14% eventually.
- For those focused on personal finance and savings, it's worth noting the reduced CGT allowance for 2025/26, which is now £3,000, down from £6,000 in the previous year, meaning gains up to this amount are tax-free.
- To minimize tax liability on investments, one strategy could be investing through a stocks and shares ISA, as this exempts capital gains tax completely, making it an attractive option for many in their personal finance planning.
