Capital Gains Tax annual exempt amount reduction

The CGT annual exempt amount has seen a sharp reduction, falling to £3,000 for the 2024/25 tax year. This is down from £6,000 in the previous year and £12,300 before that.

As a result, many more individuals selling assets like second homes, shares, or business equipment will find themselves with a taxable gain and a requirement to file a self-assessment tax return or use the real-time CGT service.

Who is affected?

The reduction affects anyone disposing of a capital asset that is not exempt from CGT. This includes buy-to-let properties, shares held outside an ISA, business assets, and even valuable personal possessions (chattels) like antiques or artwork. With the allowance now so low, even relatively modest gains will trigger a tax liability.

Reporting requirements

The lower threshold also means more people will be caught by the reporting requirements. If you sell a UK residential property and have CGT to pay, you must report and pay the tax within 60 days of completion. For other assets, you must report the gain on your annual Self Assessment tax return. Even if your gains are below £3,000, you must still report them if the total proceeds from the sales exceed £12,000.

Mitigation strategies

To mitigate the impact, taxpayers should consider utilising tax-efficient wrappers like ISAs for shares. Married couples and civil partners can also transfer assets between themselves on a 'no gain, no loss' basis before a sale, allowing them to utilise both of their £3,000 allowances, effectively doubling the tax-free amount.