Three Ways to Reduce Your Capital Gains Tax Bill in 2026

Capital Gains Tax (CGT) receipts reached a record £24.3 billion in 2025/26, according to HMRC, highlighting the growing tax burden facing UK investors, landlords and business owners.

With Capital Gains Tax allowances reduced and tax rates increased, more taxpayers are finding themselves liable for CGT when selling investments, shares, second properties and other chargeable assets.

The good news is that with careful tax planning, it may be possible to significantly reduce – or even eliminate – your Capital Gains Tax liability.

At AWR Accountants, our experienced tax advisers help clients across Derby and the UK maximise available allowances and minimise unnecessary tax bills.

Why Are More People Paying Capital Gains Tax?

Several factors have contributed to the sharp increase in CGT receipts:

Reduced Capital Gains Tax Allowance

The annual CGT exemption has been reduced significantly:

• £12,300 in 2022/23
• £6,000 in 2023/24
• £3,000 from 2024/25 onwards

This means many more individuals are now paying tax on investment gains that would previously have been covered by their annual exemption.

Higher Capital Gains Tax Rates

Following changes introduced in October 2024:

• Basic rate taxpayers now pay 18% CGT (previously 10%)
• Higher and additional rate taxpayers now pay 24% CGT (previously 20%)

These increases can make a substantial difference when selling investments or other valuable assets.

What Triggers Capital Gains Tax?

Capital Gains Tax may arise when you:

• Sell shares or investments
• Dispose of a second property
• Sell business assets
• Gift assets to someone other than your spouse or civil partner
• Transfer certain investments

The gain is generally calculated as the difference between the purchase cost and sale value, less allowable expenses and available reliefs.

1. Make Full Use of Your Annual CGT Allowance

Every UK taxpayer currently has a £3,000 annual Capital Gains Tax allowance.

Any gains within this allowance are tax-free.

Don’t Waste Your Allowance

Unlike some tax reliefs, unused CGT allowances cannot be carried forward. If you don’t use the allowance during the tax year, it is lost permanently.

Offset Capital Losses

If you’ve made losses on investments, these can often be used to offset gains and reduce your tax bill.

You may also be able to use losses carried forward from previous tax years, provided they have been reported to HMRC correctly.

Couples Can Double Their Allowance

Transfers between spouses and civil partners are generally exempt from Capital Gains Tax.

This allows couples to potentially utilise:

• £3,000 allowance for one spouse
• £3,000 allowance for the other spouse

Giving a combined tax-free gain of £6,000 per tax year.

For larger disposals, transferring assets to a spouse who pays tax at a lower rate may produce significant tax savings.

2. Use Your ISA Allowance to Protect Future Gains

One of the most effective ways to avoid Capital Gains Tax is to hold investments within an ISA.

Why ISAs Are Tax Efficient

Investments held within an ISA benefit from:

• No Capital Gains Tax
• No Dividend Tax
• No further tax reporting requirements

This makes ISAs one of the most tax-efficient investment vehicles available to UK taxpayers.

Consider a Bed and ISA Strategy

If you currently hold investments outside an ISA, a Bed and ISA arrangement allows you to:

1. Sell existing investments.
2. Transfer the proceeds into an ISA.
3. Repurchase the investments within the ISA wrapper.

Although the sale may trigger a capital gain, careful planning can help utilise your annual CGT allowance and gradually move investments into a tax-free environment.

3. Use Pension Contributions to Reduce Tax Exposure

Many people are unaware that pension contributions can also help reduce Capital Gains Tax liabilities indirectly.

Pensions Offer Tax-Free Growth

Like ISAs, investments held within pensions grow free from:

• Capital Gains Tax
• Dividend Tax

Pension Contributions Can Reduce Tax Rates

Making pension contributions reduces your adjusted net income.

This can help you:

• Remain within the basic rate tax band.
• Avoid moving into higher tax bands.
• Preserve valuable tax allowances.

For Capital Gains Tax purposes, remaining a basic rate taxpayer may mean paying CGT at 18% rather than 24%, potentially generating substantial savings.

With income tax thresholds frozen until at least 2031, more taxpayers are being pushed into higher tax bands through fiscal drag. Pension planning can therefore be an effective long-term tax planning strategy.

How AWR Accountants Can Help

Capital Gains Tax planning should begin well before the sale of an asset.

At AWR Accountants, our specialist tax advisers provide:

• Capital Gains Tax advice
• Tax-efficient investment planning
• Property tax planning
• Capital loss utilisation reviews
• CGT reporting and compliance
• Tax planning for business owners and landlords

Whether you’re considering selling shares, investments, property or business assets, obtaining professional advice before disposal could save thousands of pounds in unnecessary tax.

Need Capital Gains Tax Advice?

Contact AWR Accountants in Derby today for expert Capital Gains Tax planning and personalised tax advice designed to help you keep more of your investment returns.