How to Avoid or Reduce Capital Gains Tax in the UK? [Guide]

You can reduce or avoid Capital Gains Tax in the UK by using your annual allowance, offsetting losses, transferring assets between spouses, investing through tax-efficient schemes, and timing disposals strategically.

Capital Gains Tax (CGT) often catches people off guard, especially after recent rate changes and a significantly reduced annual allowance.

The good news is that there are plenty of legitimate ways to reduce what you owe, and in some cases, avoid it altogether. This guide walks you through how to avoid or reduce CGT, with the current 2025/26 rates, so you know exactly where you stand.

Key points

• Use your CGT allowance strategically 💰
  You get a £3,000 tax-free gain allowance each tax year, but it doesn't roll over. Spreading asset sales across multiple years can reduce or even get rid of your CGT bill entirely.
• Transfer assets between spouses to double efficiency 👩‍❤️‍👨
  Moving assets to a spouse or civil partner is CGT-free and allows you to combine allowances or benefit from a lower tax rate, reducing overall tax on gains.
• Offset losses to reduce taxable gains 📉
  Investment losses can be used to reduce gains in the same year or carried forward indefinitely. Proper reporting to HMRC is essential to keeping those losses valid.
• Use ISAs and pensions to shield growth from tax 🏦
  Gains inside ISAs are CGT-free, and pension contributions can indirectly reduce CGT by lowering your taxable income and potentially your tax band.
• Stay ahead of CGT with automation tools like ANNA 🚀
  Tracking gains, losses, and deadlines can get complicated fast. ANNA helps by estimating tax in real time, setting aside money automatically, and handling Self Assessment so you stay compliant with less admin.

What is Capital Gains Tax, and when do you pay it?

Capital Gains Tax is the tax you pay on the profit you make when you sell or dispose of an asset that has gone up in value. It's not the full sale price you're taxed on – it's just the gain, the difference between what you paid for it and what you sold it for (minus allowable costs).

CGT applies to:

• Shares and funds held outside an Individual Savings Account (ISA)
• Second homes or buy-to-let properties
• Business assets
• Cryptocurrency
• Valuable personal possessions worth more than £6,000 (excluding your car)

CGT doesn't apply to your main home, assets held inside an ISA or pension, or winnings from gambling.

When do you need to report CGT?

The reporting rules depend on what you sold:

• Property: You must report and pay any CGT within 60 days of completion using HMRC's online service
• Shares and other assets: Report via Self Assessment by 31 January following the end of the tax year in which you made the gain

You may also need to report CGT if your gains exceed the £3,000 annual exemption, or if your total proceeds from selling assets are above £50,000 in the tax year.

💡 Did you know?

If you're already registered for Self Assessment, your capital gains are reported on the same return.

ANNA's Auto Accountant handles your Self Assessment filing for you, including gains from asset disposals, so nothing slips through. And if you sign up today, your 2025/26 filing is completely free.

CGT rates and allowances for 2025/26

Here's where things stand right now with the rates:

And with allowances:

⚠️ Worth knowing

The annual CGT exemption has dropped from £12,300 in 2022/23 to just £3,000 today. If you haven't reviewed your investments or asset disposals recently, now is a good time to do so.

ANNA's real-time tax estimates can show you where you stand as you earn and sell, so there are no unpleasant surprises at year end.

How to avoid or reduce Capital Gains Tax in the UK: A simple guide

Here's a quick overview of all of the strategies you can use to lower your CGT bill:

Use your annual CGT exemption every year

Everyone gets £3,000 of gains each tax year completely free. However, it's a 'use it or lose it' allowance, as it resets on 6 April and can't be carried forward.

This also means that, if you're selling assets that have increased in value, it can help to spread the sales across different tax years.

For example, if you have shares with a £9,000 gain, selling a third each year over three tax years could mean paying no CGT at all. On the other hand, if you sold everything in one go as a basic rate taxpayer, your bill could be up to £1,440.

Transfer assets to your spouse or civil partner

Transfers between spouses and civil partners are exempt from CGT. This opens up two big planning opportunities:

• Double your annual exemption: Each of you gets £3,000, so together you have £6,000 of tax-free gains per year
• Use their lower tax rate: If your spouse is in the basic tax rate band and you are in the higher one, transferring assets to them before disposal could cut your CGT rate from 24% to 18%

The key rule: the transfer itself must be a genuine, outright gift with no conditions attached. It can't be a paper arrangement just for tax purposes.

⚠️ Worth knowing

This only applies to married couples and civil partners. It doesn't work for unmarried couples living together, no matter how long you've been together. If this is part of your planning, it's worth speaking to a tax adviser to make sure everything is structured correctly.

Offset losses against gains

If you've sold assets at a loss, those losses can be used to reduce your taxable gains, and they're more useful than most people realise.

Here's how it works:

• Use losses in the same year first: Any losses are automatically deducted from your gains in the same tax year before your £3,000 allowance is applied
• Carry losses forward: If you don't use all your losses, you can carry them forward indefinitely and use them against future gains
• Report them to HMRC: You must report capital losses within four years after the end of the tax year in which they occurred. Otherwise, you may lose the ability to claim them

For example, if you make a £10,000 gain on shares but a £4,000 loss on crypto in the same year, your net taxable gain is £6,000. After your £3,000 exemption, only £3,000 is taxable.

💡 Did you know?

HMRC has rules preventing you from selling and immediately rebuying the same shares to create a loss. You must wait at least 30 days before rebuying.

Use your ISA allowance

Any gains made inside a Stocks and Shares ISA are free from CGT, no matter how large they are. The same goes for income from dividends within an ISA.

You can invest up to £20,000 per tax year into ISAs across all types combined. Over time, moving investments into an ISA wrapper is one of the most reliable ways to protect long-term growth from CGT.

If you hold shares outside an ISA that have grown significantly, you can sell them (triggering a disposal for CGT purposes), then use the proceeds to buy them back inside an ISA.

However, be mindful of HMRC's 30-day rule. If you buy back the same shares within 30 days, you won't immediately get the full tax benefit from selling them.

⚠️ Worth knowing

The £20,000 ISA allowance resets on 6 April each year and can't be carried forward. If you haven't used this year's allowance, it's a good idea to review it before the tax year ends.

Contribute to a pension

Pension contributions can indirectly reduce your CGT bill by lowering your taxable income, which in turn affects which CGT rate applies to your gains.

CGT rates depend on your total taxable income. If a pension contribution brings your taxable income below the higher-rate threshold (£50,270 in 2025/26), more of your gains may be taxed at 18% rather than 24%.

This can be particularly useful for self employed people who have more flexibility over how much they contribute in a year.

Claim Business Asset Disposal Relief

If you're selling all or part of a trading business, Business Asset Disposal Relief (BADR) could significantly reduce your CGT bill. Qualifying disposals are taxed at just 14% in 2025/26 – lower than the standard rates, though the relief is less valuable than it used to be due to recent budget changes.

You may qualify for BADR if:

• You're selling a business you've run as a sole trader or partnership for at least two years
• You're selling shares in your own company where you own at least 5% of shares and voting rights, and have been an employee or director for at least two years

You can only claim BADR on up to £1,000,000 of total qualifying gains across your lifetime. Once you reach this limit, any additional gains are taxed at the standard CGT rates.

⚠️ Worth knowing

The BADR rate is rising to 18% from 6 April 2026 – so if you're planning a business disposal and might qualify, timing matters. Speaking to a tax adviser before acting can be worthwhile, as the potential tax savings could be substantial.

Give to charity

Gifts to registered UK charities are completely exempt from CGT. If you donate shares or property that have risen in value, you won't pay CGT on the gain, and you may also be able to claim Income Tax relief through Gift Aid.

This won't suit everyone, but for people who regularly donate to charity and hold appreciated assets, it can be an efficient way to give more while paying less tax.

ANNA – A simpler way to stay on top of CGT and Self Assessment

Capital gains don't always arrive on a neat schedule. You might sell shares in October, dispose of a property in January, and suddenly find yourself with a complicated tax bill.

ANNA is built for exactly this. It connects your day-to-day business finances with your tax obligations, so nothing falls through the cracks, and you're never caught off guard by a bill you didn't see coming.

Here's what you get:

• Real-time tax estimates: As your income changes and you make disposals throughout the year, ANNA updates your estimated tax position automatically. No more mental maths or spreadsheet guesswork – just a clear picture of what you're likely to owe before the deadline arrives.
• Smart Pots for tax savings: Every time money comes into your account, ANNA can automatically set a portion aside for tax. Whether you're putting away for Income Tax, CGT, or VAT, the money is ready when HMRC comes calling.
• Automated Self Assessment filing: Your gains, your income, your expenses – ANNA pulls it all together and submits your Self Assessment directly to HMRC.
• Invoicing and expense tracking: Every allowable cost you can deduct matters when you're calculating a gain. ANNA tracks your expenses automatically throughout the year, so you don't miss anything that could reduce your tax bill.
• Built-in UK business account: Your cash flow, bookkeeping, and tax all live in one place. No switching between apps, no manually reconciling bank statements, and no wondering whether your records are up to date.
• 24/7 support: Tax questions sometimes pop up at inconvenient times. ANNA's support team is available around the clock, so you're never stuck waiting until Monday morning for an answer.

Sign up with ANNA today and remove the admin stress from your daily workflow.