CGT Allowance UK 2025/26: A Simple Guide to Tax Loss and Gain Harvesting

The CGT allowance keeps shrinking — here's how to adapt

If you hold shares, funds, crypto, or property outside tax wrappers like ISAs or pensions, you may owe Capital Gains Tax (CGT) when you sell for more than you paid.

The annual tax-free allowance (the Annual Exempt Amount, or AEA) for 2025/26 is just £3,000 per person — down from £6,000 in 2023/24 and £12,300 as recently as 2022/23. For most trusts, it's £1,500.

That's a dramatic cut. Gains that would have been tax-free three years ago now trigger a bill. If you invest outside ISAs and pensions, you need a plan.

This guide covers:

• How the CGT allowance and rates work for 2025/26
• Tax-loss harvesting: using losses to offset gains
• Gain harvesting: using your allowance to reset cost bases
• Practical examples, record-keeping requirements, and reporting deadlines

This is general information, not personal tax advice. Always check your own position or speak to a professional about your specific circumstances.

CGT rates for 2025/26

Once your gains exceed the £3,000 annual allowance, the rates are:

• 18% on gains within your remaining basic-rate income tax band
• 24% on gains in the higher or additional rate bands

These rates now apply to all asset types (shares, property, crypto, etc.). Some specific reliefs still exist — Business Asset Disposal Relief (BADR) is taxed at 14% on qualifying gains up to the lifetime limit, and certain carried interest gains are taxed at around 32% — but for most investors, it's 18% or 24%.

When does CGT apply?

CGT is triggered when you dispose of an asset outside a tax wrapper. A disposal includes:

• Selling shares, funds, or cryptocurrency
• Gifting assets (except to a spouse or civil partner)
• Swapping or exchanging assets
• Receiving compensation for the loss or destruction of an asset

You're taxed on the profit only: sale price minus purchase price minus allowable costs. If your total gains for the year are within your £3,000 AEA, you pay nothing.

Tax-loss harvesting: turning losers into tax savings

Tax-loss harvesting means selling an investment at a loss so you can offset that loss against gains you've already made (or expect to make). It doesn't create wealth — it reduces your tax bill.

When it makes sense

• You've already realised gains above the £3,000 allowance (or expect to before April)
• You're rebalancing your portfolio anyway and one of your holdings is underwater
• You want to carry losses forward to offset larger gains in future years

Rules to know

• Losses must be realised — paper losses (where the value has dropped but you haven't sold) don't count
• Report losses to HMRC via Self Assessment. If you don't file a return, report them in writing. You have 4 years from the end of the tax year to claim — miss that deadline and the loss is gone
• Unused losses carry forward indefinitely once reported
• The 30-day rule for shares: if you sell shares and buy the same class of shares in the same company within 30 days, special matching rules apply. Your loss may be reduced or disallowed. This exists to stop "bed and breakfasting" — selling and immediately rebuying just to crystallise a loss

Worked example

You have a £4,000 gain from Fund A and a £3,000 loss on Fund B, both in the same tax year.

Without harvesting:

• £4,000 gain − £3,000 allowance = £1,000 taxable (at 18% or 24%)

With harvesting (you sell Fund B to realise the loss):

• £4,000 gain − £3,000 loss = £1,000 net gain
• £1,000 net gain − £3,000 allowance = £0 taxable

If you still want exposure to the sector Fund B covers, you can buy a similar but not identical fund — a different index tracker or a competing fund in the same space. That avoids the 30-day matching rule.

Gain harvesting: using your allowance before you lose it

Gain harvesting works the other way round. You deliberately sell enough of a profitable investment to use up your £3,000 annual allowance, then rebuy to reset your cost base higher. No CGT now, and a smaller taxable gain later.

Why bother?

• The £3,000 allowance doesn't carry forward — if you don't use it by 5 April, it's gone
• Resetting the cost base reduces the embedded gain, which means less tax when you eventually sell for good
• If you expect the allowance to stay low (or CGT rates to rise), using it each year makes sense

When gain harvesting might not work well

• Transaction costs and bid-ask spreads can eat into the benefit, especially for small gains
• If you sell and wait 30 days before rebuying (to avoid matching rules), the price might move against you
• Realising gains could push your income into a higher band if your total taxable income is near a threshold
• Complexity and admin may not be worth it for very small portfolios

Worked example

You own shares with an embedded gain of £2,800 and no other gains or losses this year.

• Sell the shares: £2,800 gain is within the £3,000 allowance → no CGT
• After 30 days, rebuy the same shares. Your new cost base is the sale price (which is now the repurchase price)
• Any future gain starts from this higher base, potentially saving tax later

Note: The 30-day share matching rules apply if you rebuy the same shares sooner. Factor in market risk and transaction costs too.

Record-keeping: what HMRC expects

Good records protect you if HMRC asks questions and make calculating your gains straightforward.

What to keep

• Purchase date and cost (including fees, commissions, and stamp duty)
• Sale date and proceeds (net of dealing costs)
• Broker statements or transaction confirmations
• Details of corporate actions affecting cost base (stock splits, rights issues, reorganisations)
• Records of losses you intend to carry forward
• Any correspondence about negligible-value claims

How long to keep them

• If you file Self Assessment: at least 5 years after the 31 January deadline following the end of the tax year
• If you don't file a return: at least 22 months after the end of the tax year
• For property and overseas assets, it's sensible to keep records for longer

Reporting and paying CGT

• Most gains are reported on your Self Assessment tax return, due by 31 January after the end of the tax year
• UK residential property disposals by UK residents must be reported and paid via HMRC's online CGT on UK property service, usually within 60 days of completion
• Check current HMRC guidance — deadlines and thresholds can change

Common mistakes

• Death by a thousand small sales: several small gains that individually seem trivial can easily exceed the £3,000 allowance when added up
• Ignoring old losses: if you have losses from previous years that you properly reported, use them — they don't expire
• Confusing ISA and non-ISA holdings: growth inside ISAs and pensions is CGT-free. Growth outside them isn't. Don't mix up which account you're selling from
• Falling foul of the 30-day rule: buying the same shares within 30 days of selling them can destroy your loss claim or reset your gain
• Assuming the allowance carries forward: it doesn't. Use it or lose it, every year
• Forgetting transaction costs: dealing charges, spreads, and stamp duty can erode the benefit of gain harvesting on small amounts

The bigger picture

CGT is only one part of your tax position. Your income tax band, pension contributions, ISA usage, and investment strategy all interact. A gain that keeps you in the basic-rate band costs 18% in CGT; the same gain pushing you into higher rate costs 24%.

If you want to see how your salary and investments fit together, the salary calculator can give you a quick view of where your income sits against the tax bands.

For anything complex — large property disposals, overseas assets, business sales — speak to a qualified tax adviser.