Medical & General Financial Solutions Ltd

Explained: Capital Gains Tax and how you could reduce your liability

Published: September 2, 2026 by Jennifer Armstrong

The amount HMRC is forecast to collect through Capital Gains Tax (CGT) is set to more than double between 2024/25 and 2030/31, according to the Office for Budget Responsibility (OBR, 9 February 2026). The good news is that there might be steps you could take to reduce a potential bill.

CGT is a tax you might pay on gains you make when you dispose of certain assets, including:

• Shares that aren’t held in a tax-efficient wrapper, like an ISA
• Property that’s not your main home
• Some business assets
• Personal possessions worth more than £6,000 (excluding your car).

Policy changes have led to rising Capital Gains Tax bills

Over the last few years, there have been several changes to the CGT exemption and tax rates, which have led to more people becoming liable for the tax.

In the 2022/23 tax year, the Annual Exempt Amount (the amount of gains you could make before CGT may be due) was £12,300. In 2026/27, it now stands at just £3,000.

In addition, when you pay CGT, the tax rates have increased. The basic rate of CGT increased from 10% to 18% while the upper rate increased from 20% to 24%.

A combination of these factors means CGT receipts are predicted to double. The OBR data suggests HMRC will collect £13.7 billion from CGT in 2024/25. By 2030/31, the figure is forecast to reach £29.8 billion.

If you’ll be disposing of assets in the future, considering how to manage a potential CGT bill could be valuable.

5 ways you might reduce a Capital Gains Tax bill

1. Use your Annual Exempt Amount

As mentioned above, your Annual Exempt Amount is £3,000 for each tax year. Any unused allowance doesn’t carry forward to the next year. So, if reducing a CGT bill is a priority, you could make full use of the allowance.

To do this, you might need to spread the disposal of assets across several tax years. A long-term tax strategy could help you assess when to dispose of each asset to maximise tax efficiency while supporting your other financial goals.

2. Pass assets to your spouse or civil partner

You can usually pass on assets to your spouse or civil partner without CGT being due. As the Annual Exempt Amount is per individual, this could effectively double the gains you can make before CGT is applied.

You might also transfer assets to benefit from a lower tax rate if you’d pay the upper CGT rate. Depending on your partner’s other taxable income, they might pay CGT at the lower basic rate and reduce the tax bill.

3. Offset allowable losses

You don’t always make a profit when selling assets. While this may be disappointing, you may carry forward losses you’ve reported to HMRC to offset gains and potentially reduce your CGT liability.

4. Deduct your costs

Certain costs associated with buying, improving or selling an asset may be deductible when calculating your CGT liability.

Imagine you have a buy-to-let property, which you now plan to sell. You might have spent money on Stamp Duty and legal fees, which may be deductible when calculating your taxable gain. If you’ve carried out home improvements, these may also be used to reduce a CGT bill.

The same strategy could also apply to other assets. For example, if you sold artwork at an auction, certain associated costs could potentially be deducted when calculating your gain.

5. Move assets into tax-efficient wrappers

If you hold investments outside tax-efficient wrappers, you may want to consider moving them.

A Stocks and Shares ISA offers a tax-efficient way to invest as gains aren’t liable for CGT. In the 2026/27 tax year, you can invest up to £20,000 in ISAs.

If you already hold investments outside of an ISA, you could sell them and immediately rebuy the same investments within your ISA. This strategy is known as “Bed and ISA”. If your taxable gains exceed the Annual Exempt Amount, you could be liable for CGT, so you may benefit from taking this approach over several tax years.

In addition to ISAs, pensions also offer a tax-efficient way to invest, as gains on investments held within a pension are generally not subject to CGT. However, there are some important considerations to weigh up before you increase your pension contributions.

First, you cannot usually access the money held in your pension until you turn 55 (rising to 57 in 2028), which might not suit your investment time frame.

Second, if your total pension contributions exceed the pension Annual Allowance, you could face a tax charge. In 2026/27, the Annual Allowance is £60,000, but if you’re a high earner or have already taken an income from your pension, it may be lower. If you have any questions about your Annual Allowance or making pension contributions, please get in touch.

Talk to us about your tax liability

As part of your financial plan, we could review your current tax liability and assess how you may reduce the overall bill. Please get in touch to arrange a meeting.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate tax planning.

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