£ Understand Your Tax
Tax planning · UK · 2025/26

How to legally reduce your Capital Gains Tax

Capital Gains Tax (CGT) is the tax on the profit when you sell something that's gone up in value — a second property, shares, a business. UK tax law has several built-in ways to pay less. Here they are in plain English, with a tool to show your potential saving.

The legal ways to cut CGT — at a glance

See how much you could save

Enter your gain, then switch on the reliefs that genuinely apply to you. The tool compares your tax with no planning to your tax with those reliefs.

Your situation

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You could save up to
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Tax with no planning
£0
Tax with these reliefs
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Illustration only, using 2025/26 rates. It assumes both partners pay the same rate; if one is a basic-rate taxpayer the saving can be larger. It doesn't replace advice. Open the full CGT calculator →

The reliefs, explained simply

Each card below tells you what the relief is, who can use it, and what to watch out for — with a link to the official HMRC guidance.

🎁 Your annual allowance

Everyone

The first £3,000 of gains in a tax year is completely tax-free. It resets every 6 April and can't be carried forward — use it or lose it.

Who: every individual, automatically.
Watch out: if you don't sell anything in a year, that year's allowance is gone for good.
Official guidance →

💍 Spouse & civil-partner transfers

Married / civil partners

You can move an asset to your husband, wife or civil partner with no CGT at the point of transfer. That lets a couple use two £3,000 allowances, and shift an asset to whoever pays the lower rate before selling.

Who: legally married or civil partners who are living together.
Watch out: the transfer must be genuine — real, beneficial ownership has to change. It doesn't work for unmarried partners, where a transfer can itself trigger CGT.
Official guidance →

🏡 Private Residence Relief

Homeowners

You usually pay no CGT on your own home. If a property was your main home for only part of the time you owned it, that proportion — plus the final 9 months — is exempt. The rest of the gain is taxable.

Who: people selling a property that was genuinely their only or main residence for some or all of the time they owned it.
Watch out: a short or staged stay to "create" relief can be challenged by HMRC — it has to be a real home, with the quality of genuine residence. "Flipping" which property is your main home is closely scrutinised.
Official guidance →

📉 Offset your losses

Investors

Made a loss on other assets? Those losses cancel out gains in the same year. Unused losses can be carried forward to future years once reported to HMRC.

Who: anyone with capital losses, including on shares or crypto.
Watch out: you generally need to report a loss within 4 years of the end of the tax year to use it later.
Official guidance →

🛡️ ISAs & "Bed and ISA"

Investors

Investments inside a Stocks & Shares ISA are free of CGT forever. "Bed and ISA" means selling holdings and rebuying them inside an ISA so future growth is sheltered.

Who: UK residents, up to the £20,000 annual ISA limit.
Watch out: selling to move into an ISA can itself trigger a gain now — plan it around your £3,000 allowance.
Official guidance →

🧾 Deduct your costs

Everyone

The gain is the profit after costs. You can deduct buying and selling fees (legal, estate agent, stamp duty paid) and money spent improving an asset — an extension, not routine repairs.

Who: anyone selling a chargeable asset.
Watch out: keep receipts; repairs and maintenance don't count, only capital improvements.
Official guidance →

📅 Spread sales across tax years

Investors

Selling part of a holding before 6 April and the rest after uses two years' £3,000 allowances instead of one.

Who: anyone able to split a disposal, e.g. selling shares in two tranches.
Watch out: markets move — the tax saving may be small next to price risk.
Official guidance →

🚀 Business & investment reliefs

Advanced

Reliefs like Business Asset Disposal Relief (a reduced rate on qualifying business sales) and EIS/SEIS (deferring or reducing gains by investing in startups) can cut CGT substantially.

Who: business owners and investors meeting strict qualifying conditions.
Watch out: conditions are detailed and rates are changing — get professional advice before relying on these.
Official guidance →

Legal planning vs. illegal evasion

This is the line that matters. You're entitled to arrange your affairs to use the reliefs Parliament created — that's tax planning. What's illegal is misrepresenting the facts to claim relief you're not entitled to.

✓ Legal planning
Selling shares across two tax years to use both allowances; genuinely living in a home so it qualifies for relief; a real transfer of an asset to your spouse before selling.
✗ Illegal evasion
Pretending a property was your main home when it wasn't; hiding a transfer that didn't really happen; under-declaring the sale price or not reporting a gain at all.

Frequently asked questions

Is reducing capital gains tax legal?
Yes — using reliefs and allowances the law provides is legitimate. It only becomes illegal if you misrepresent the facts to claim something you don't qualify for.
How do married couples pay less CGT?
Transfers between spouses/civil partners are CGT-free, so a couple can use two £3,000 allowances and move an asset to the lower-rate partner before selling. You must be married/civil partners living together, and the transfer must be genuine.
Can living in a property reduce the tax?
Yes — Private Residence Relief exempts the proportion of time it was genuinely your main home, plus the final 9 months. Brief or artificial occupation can be challenged, so it must be a real home.
Do I still have to report the gain?
Usually yes, even if reliefs reduce the tax to zero — particularly for UK residential property, which has its own 60-day reporting deadline. Check the rules or ask an adviser.

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Educational guide — not tax advice. UK reliefs for the 2025/26 tax year, explained in general terms. Reliefs have detailed conditions and change over time (for example, Business Asset Disposal Relief rates are rising). Whether a relief applies depends on your circumstances. Always confirm with HMRC and a qualified tax adviser before acting.