Capital gains tax has become a bigger revenue stream for the government, pulling in more taxpayers than before. With annual allowances cut to £3,000 and rates rising after the October 2024 budget, experts are urging people to use ISAs, allowances and losses st
The moment you sell something you’ve been holding for years—an investment, a property that isn’t your main home, or even a personal item that has jumped in value—you may be thinking about profit.
For many people now, the follow-up thought is harsher: how much of that profit will be taken as capital gains tax.
This tax year’s numbers show why that question is landing more often. In 2025-26, the government raised £24.3bn through capital gains tax—up almost 80% from £13.7bn the previous year. It is also more than three times the amount raised in 2017-18. Clare Stinton. senior personal finance analyst at the investment platform Hargreaves Lansdown. calls it “a decent cash machine for the taxman.” The Office for Budget Responsibility has predicted that receipts will keep rising and could reach £35bn in 2030-31.
At the same time, the rules governing how CGT applies have changed in ways that bring more people into the net. And with the scale of the shift, this week experts were reminding consumers that there are legitimate ways to reduce a CGT bill—sometimes by reshaping what you do before you sell.
CGT is charged on the profit you make when you “sell” or otherwise “dispose of” something that has increased in value. The assets involved can be broad: investments such as funds and shares held outside an Isa. property that is not your main home. and many personal possessions worth £6. 000 or more—except for cars.
There is a tax-free allowance each year, known as the annual exempt amount. But it has been cut sharply in recent years. Until 2022-23, the allowance was £12,300. It was then cut to £6,000, and now it is £3,000. Stinton points out that this allowance refreshes each tax year—“if you don’t use it, you lose it.”.
CGT rates have also been increased. Under the October 2024 budget, higher-rate taxpayers now pay 24% on their gains. For basic-rate taxpayers, the rate depends on the size of the gain and their taxable income, with the lower rate set at 18%.
The tax impact isn’t just about who has the most money; it’s about who has gains that spill over into the part of the tax system that charges more. Clare Moffat. a pensions and tax expert at the insurer Royal London. explains that where capital gains exceed the annual tax-free allowance. they are added on top of taxable income when working out the rate of CGT.
So experts say the focus has to be on the mechanics—timing, allowances, and how gains interact with other parts of your finances.
One lever is what happens within an Isa. There are various ways to reduce CGT liability. and many experts say it matters more than ever to make full use of Isa allowance. UK residents aged 18-plus can invest up to £20,000 each per tax year. Parents can also put up to £9,000 per child per tax year into a junior Isa. “Making a total of £58,000 for a family of four,” Elsa Littlewood, a tax partner at the accountancy firm BDO, says.
For those who hold investments outside an Isa. selling can still trigger a CGT bill—but there is a key tool: offsetting losses. Investors are able to offset losses against gains that are taxable. either in 2026-27 or in later years. as long as the losses are claimed through their tax return. “So matching gains and losses can cut the overall tax bill,” Littlewood says.
Another strategy comes from how allowances can be used across households. CGT usually isn’t paid on assets given to a husband, wife or civil partner. That means. as Stinton explains. married couples and those in civil partnerships can transfer investments between each other so both people can use their CGT allowances. “That’s annual gains of £6,000 before tax may be payable.”.
And if you’re thinking about family plans, there’s a specific possibility tied to retirement and housing. Littlewood adds that if someone has adult children planning to buy a home. they may want to gift funds so those children can invest in a lifetime Isa. These can be opened by those aged 18 or over but under 40.
There’s also the matter of taxable income itself. Moffat says reducing taxable income can help reduce a CGT bill. with two main routes: paying into a pension or making charitable donations. She gives a concrete example: if selling an asset would push someone into the higher-rate tax band. a pension contribution for the amount that takes them over could mean they pay 18% CGT instead of 24%.
“You’re boosting your retirement pot,” Moffat adds.
Then there is what happens after someone dies. Moffat says that if you inherit an asset from a loved one. you should think carefully about whether you want to keep it. When you inherit an asset, inheritance tax is usually paid by the estate of the person who died. But if the inherited asset is later sold or given away. the question of CGT comes back in: you would need to work out whether CGT is due.
The numbers show the direction: capital gains tax is bringing in more money for the government. and the scale is large enough that experts are meeting the moment by returning to the basics. With the annual exempt amount now £3. 000. and with rates set at 18% and 24% depending on circumstances. the most immediate lesson for many taxpayers is practical—check where your gains land. use your allowances. and plan what happens before and after you sell.
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