Everything You Need to Know About Capital Gains Tax (And How to Manage It)
- Omar Aswat
- May 1, 2025
- 7 min read
Updated: Dec 22, 2025
Capital Gains Tax (CGT) is one of the most important taxes for individuals and businesses to understand when it comes to asset disposal. Whether you’re selling a business, transferring property, or parting ways with investments, CGT could have a significant impact on your finances. This guide breaks down what CGT is, how it works, and strategies for managing your tax liability.
Table of Contents
What is Capital Gains Tax (CGT)?
Capital Gains Tax is levied on the profit made from the sale or disposal of a chargeable asset. When you sell, gift, or transfer an asset, you must consider if any profit will trigger Capital Gains Tax (CGT). If your asset has increased in value since you acquired it, you may owe Capital Gains Tax (CGT) on the gain.
Assets that are typically subject to CGT include:
Real Estate: Land and property (excluding your primary residence, with some exceptions)
Business Assets: Shares, equipment, and goodwill associated with a business
Investments: Stocks, bonds, and shares (except those held in ISAs)
Personal Possessions: Valuable items such as artwork, jewellery, and certain collectibles
Foreign Currency: If you make a gain on foreign exchange transactions
For a deeper look at how Capital Gains Tax works on different assets, including investments and trusts, you might find our guide on Capital Gains Tax Explained: Manage Your Investments Wisely helpful.
Exemptions and Reliefs Available
While CGT is applicable to many types of assets, there are several exemptions and reliefs that can help reduce your liability. One of the most important is the annual exemption, which allows you to realise a certain amount of gains without incurring CGT.
The Annual Exemption
The government has set the annual exemption at £3,000 per person for the 2024/2025 tax year. This means that you can realise up to £3,000 of gains without having to pay any CGT. If you don’t use it by the end of the tax year, you lose it—so it’s important to consider realising gains within that limit to maximise the exemption.
Tip: Couples can combine their exemptions, meaning a couple could potentially shelter £6,000 from CGT by strategically planning disposals. HMRC treats transfers between spouses or civil partners as “no gain, no loss,” allowing partners to transfer assets without triggering a CGT liability. This allows couples to take full advantage of both individuals' annual exemptions. By splitting assets or planning disposals carefully, you can further optimise your CGT position.
Business Asset Disposal Relief (BADR)
Business owners have the opportunity to benefit from Business Asset Disposal Relief (formerly Entrepreneurs' Relief) when selling shares in a trading company or business assets. BADR allows qualifying individuals to pay CGT at a reduced rate of 10% on gains of up to £1 million over their lifetime.
Changes Coming: Keep in mind that the threshold for BADR will decrease over the next few years, so if you’re planning to sell a business or business assets, it may be beneficial to act sooner rather than later.
For more information on why acting early is crucial, check out our blog: Business Asset Disposal Relief: Act Now or Pay More Later.
Understanding Capital Gains Tax Rates
The rate at which CGT is charged depends on your income and the type of asset you’re selling. Here's an overview:
Type | 6 April 2024 - 29 October 2024 | From 30 October 2024 | 2025-26 |
Individuals
- Basic rate
- Higher rate
- Basic rate residential property gains
- Higher rate residential property gains
| 10% 20% 18% 24% | 18% 24% 18% 24% | 18% 24% 18% 24% |
Basic rate carried interest gains | 18% | 18% | 32% |
Higher rate carried interest gains | 28% | 28% | 32% |
Trusts - Residential Property - Other chargeable assets | 24% 24% | 24% 24% | 24% 20% |
BADR & IR | 10% | 10% | 14% |
Tax Considerations for Property Owners
When selling property, residential property is subject to special rules. Any gains made from the sale of UK residential property must be reported to HMRC within 60 days of the sale completion. Failure to do so can result in penalties and interest charges.
Main Residence Relief: In general, HMRC exempts gains from the sale of your primary residence from CGT, provided you haven’t used it for business purposes or let it out for a significant time. However, if you have multiple homes, only one can qualify for this relief.
If you're selling residential property, don't miss our podcast episode: #3 Capital Gains Tax: 60 Day Reporting & Payment.
Also, if you're planning ahead for major upcoming changes, read: Strategies for Capital Gains Tax Changes on Property.
Employee Ownership Trusts (EOTs)
An Employee Ownership Trust (EOT) is an effective way to transfer ownership of a company to its employees, while offering significant tax advantages. When a company owner sells to an EOT, they can qualify for a 0% Capital Gains Tax (CGT) rate on an unlimited amount of gains, provided they meet certain conditions. This special treatment remains in place despite the ongoing changes to CGT rates and thresholds.
EOTs remain a powerful planning tool. Find out about other ways major tax shifts could affect business owners in our blog Will 2025 Be the Year of Major Tax Changes? How to Prepare.
Recent Updates: Starting from 30 October 2024, the rules surrounding EOTs have been tightened to combat potential tax avoidance and ensure the trusts serve genuine employee ownership purposes. These updates aim to guarantee that the tax reliefs granted are being used appropriately.
Beyond the tax benefits, employee ownership fosters greater engagement, retention, and productivity within the company. It can also improve morale as employees benefit directly from the company’s success, making it a strategic option for both business owners and employees.
Curious about how Employee Ownership Trusts work? Watch our detailed guide: Employee Ownership Trusts (EOTs) – EVERYTHING You Need to Know.
Discover the 3 Commercial Benefits of Selling Your Business to an EOT and how this strategy could maximise value for you and your employees.
Plus, stay updated with 4 Key Changes to Employee Ownership Trusts Post Budget 2024, crucial if you're considering an EOT structure in the future.
How to Minimise Capital Gains Tax
Understanding how CGT works can help you develop strategies to reduce your tax liability. Here are a few methods to consider:
Make Full Use of Your Annual Exemption
As mentioned earlier, the £3,000 annual exemption allows you to avoid CGT on that amount of gain each year. Be proactive and realise gains in a way that takes full advantage of this exemption.
Consider Gifting Assets
Transfers between spouses or civil partners are typically exempt from CGT, allowing you to pass assets without triggering a tax liability. Additionally, if assets are transferred to other family members, this could allow you to split the tax burden across multiple people.
Planning to gift assets or thinking ahead for inheritance purposes? Watch our video on Capital Gains Tax reliefs when gifting assets for inheritance tax purposes.
Offset Losses
If you’ve realised capital losses (for example, from selling an investment at a loss), these losses can be offset against future capital gains. This helps reduce the amount of taxable gains you have in future years. Be sure to report these losses to HMRC, as they don’t automatically carry over.
Learn about how trust structures and income tax interplay with CGT in our detailed video on Income tax and Capital Gains Tax on Trusts.
Business Asset Disposal Relief (BADR)
For business owners, using BADR can significantly reduce CGT on the sale of your business. If you’re planning to sell your business, it’s worth reviewing whether you qualify for this relief and timing your sale accordingly.
Changes to CGT Rules in 2025 and Beyond
The UK government is continually making adjustments to CGT rates and thresholds, so it’s essential to stay updated on these changes. For example, the reduction in Business Asset Disposal Relief (BADR) and the changes to residential property rates could significantly affect your planning strategy if you’re a business owner or property investor.
If you're an investor, especially in crypto or shares, you’ll also want to see our updated guides on Crypto Tax UK 2024/2025 and Capital Gains on Share Buyback: Tax Rules & Requirements.
Conclusion
Capital Gains Tax is a complex area of tax law, but understanding the basics and utilising available exemptions and reliefs can make a significant difference in reducing your tax burden. If you’re considering selling assets, whether business shares, property, or investments, it's crucial to plan ahead and take full advantage of any opportunities for tax savings.
Still have questions about property taxes? Our blog Answered: The Most Common Property Tax Questions in the UK covers everything you need to know.
As always, seeking professional advice tailored to your specific circumstances is recommended to ensure you're complying with the law while minimising your CGT liability.
Get in touch with ASWATAX today to discuss how we can help you navigate the complexities of Capital Gains Tax and make the most of available reliefs and exemptions.
Meet Omar Omar is a Chartered Tax Advisor (a.k.a an expert on tax issues) and founder of ASWATAX. He regularly shares his knowledge and best advice here in his blog and on other channels such as LinkedIn. Book a call today to learn more about what Omar and ASWATAX can do for you.
*Disclaimer: ASWATAX is a firm of Chartered Tax Advisors, and we strive to provide accurate, up-to-date tax insights. Tax laws may change, so this content is for general guidance only and not a substitute for professional advice. Seek independent tax and legal counsel before making decisions. ASWATAX is not liable for any loss from reliance on this information. Use at your own risk.
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