CGT Annual Exempt Amount 2026/27: £3,000 and How to Use It Wisely

The dramatic reduction in the Capital Gains Tax annual exempt amount (AEA) over the past three years represents one of the biggest stealth tax increases affecting UK investors. At £12,300 in 2022/23, most ordinary investors rarely triggered a CGT liability. At £3,000 in 2026/27, even modest investment portfolios can generate taxable gains when positions are sold or rebalanced.

Understanding how to work within this new reality — and the strategies available to minimise your exposure — is now essential for anyone holding investments outside an ISA.

The AEA Reduction: What Changed

Note: CGT rates on residential property remain higher at 18% (basic) and 24% (higher rate).

The combined effect of a smaller AEA and higher rates since October 2024 has significantly increased CGT exposure for investors who have not proactively restructured their holdings.

Strategy 1: Crystallise Gains Each Year Up to £3,000 (Bed-and-ISA)

The most powerful strategy for investors with gains in unwrapped investments is bed-and-ISA: selling investments to realise gains up to the AEA, then immediately repurchasing the same investments inside a Stocks and Shares ISA.

How Bed-and-ISA Works

1. Identify investments in your general investment account with unrealised gains
2. Sell sufficient holdings to crystallise up to £3,000 of gain
3. Use your ISA allowance to immediately purchase the same (or similar) investments inside your ISA
4. Result: future growth on that holding is permanently sheltered from CGT

The 30-day rule does not apply to ISA purchases — you can sell shares and repurchase identical shares inside an ISA on the same day without triggering the anti-avoidance provisions.

Example

Alex holds £25,000 of a global equity ETF (purchased for £15,000 — gain of £10,000). In 2026/27:

• Sells 30% of the holding: proceeds £7,500, gain = £3,000 (exactly the AEA)
• CGT due: £0 (gain is within the £3,000 AEA)
• Immediately buys the same ETF inside her Stocks and Shares ISA: £7,500
• Future gains on this £7,500 (and all future growth) are now permanently CGT-free

Alex repeats this each tax year until the entire holding is sheltered inside her ISA. Without this strategy, selling the entire £25,000 holding in one year would generate a £10,000 gain — £7,000 above the AEA, potentially taxable at 18–24%.

Strategy 2: Transfer to a Spouse or Civil Partner

Transfers between spouses and civil partners are CGT-free — no gain or loss is crystallised on the transfer itself. The recipient takes on the original acquisition cost.

This creates a significant planning opportunity:

• Each spouse has their own £3,000 AEA
• By transferring assets to a lower-rate taxpayer or one with unused AEA, you can effectively double the combined annual relief to £6,000

Example

Ben has investments with £8,000 of unrealised gains. His wife Sarah has no investments and has not used her AEA.

• Ben transfers half the investment to Sarah (no CGT on transfer)
• Ben sells his half: £4,000 gain, but his AEA covers £3,000 → £1,000 taxable
• Sarah sells her half: £4,000 gain, covered by her £3,000 AEA → £1,000 taxable
• Total CGT: on £2,000 combined — significantly better than Ben selling the whole position

Alternatively, if they time the sales across two tax years, using each spouse's AEA in both years could potentially eliminate the CGT entirely on an £8,000 gain.

Important: The transfer must be genuine. Using a spouse as a nominee while retaining economic interest is tax avoidance and would be challenged by HMRC.

Strategy 3: Use Losses to Offset Gains

Capital losses from the same tax year must be offset against gains before the AEA is applied. Losses cannot be "banked" to save for a good year — they are automatically used against same-year gains.

However, losses in excess of your gains (net losses) can be carried forward indefinitely and used against future gains.

Loss Harvesting

Loss harvesting involves deliberately selling investments at a loss to create usable losses before the tax year end (5 April). This is most useful when:

• You have other gains in the same year that exceed your AEA
• You believe the investment may recover but want the tax benefit now

The 30-day rule caveat: Selling an investment at a loss and repurchasing it within 30 days removes the tax benefit — HMRC matches the transactions and denies the loss. To harvest a loss effectively:

• Wait 31+ days before repurchasing the same asset
• Immediately repurchase a similar but not identical fund (e.g., switch from one global equity ETF to another tracking a slightly different index)
• Have your spouse purchase the asset immediately (no 30-day rule on interspousal transactions)

Strategy 4: Timing Sales Across Tax Years

The tax year runs from 6 April to 5 April. A sale completed on 5 April 2027 falls in 2026/27; the same sale on 6 April 2027 falls in 2027/28 and uses a fresh AEA.

Where gains exceed £3,000, splitting sales across two tax years can significantly reduce — or eliminate — the CGT liability:

Without timing, selling both halves in 2026/27 would result in a £3,000 taxable gain.

Strategy 5: Pension Contributions and CGT Interaction

For higher rate taxpayers, pension contributions reduce your adjusted net income, which can drop you below the higher rate threshold and reduce CGT rates from 24% to 18% on some or all gains.

If you have a large capital gain in the same year as making SIPP contributions, the pension contribution may directly reduce the rate at which the gain is taxed — potentially saving 6% on gains above the basic rate band.

Reporting Capital Gains

Real Time Capital Gains Service

You must report and pay CGT within 60 days for property sales. For other assets, you can report through:

1. HMRC's Real Time Capital Gains Service — available online, report at any time during the year
2. Self Assessment tax return — annual, due 31 January following the tax year end

You must report if:

• Total gains in the year exceed the £3,000 AEA, OR
• Total disposal proceeds exceed £50,000 in the year (even if gains are below AEA)

Failure to report and pay on time attracts interest and potential penalties.

CGT-Free Investments and Exemptions

Not all investments are subject to CGT. These are always exempt:

Building your long-term wealth inside ISA and pension wrappers eliminates CGT entirely — making it the most powerful long-term CGT strategy of all.

Summary: CGT Planning Checklist for 2026/27

• Review unwrapped investment gains each year and use bed-and-ISA to crystallise up to £3,000 within the AEA
• Transfer investments to a spouse or civil partner where they have unused AEA or lower tax rate
• Harvest losses before 5 April to offset gains — but observe the 30-day rule
• Time large sales across tax year boundaries where possible
• Maintain records of all acquisition costs, dates, and disposal proceeds
• Report through HMRC Real Time CGT service or Self Assessment as required
• Consider pension contributions to reduce adjusted net income and CGT rate

The CGT landscape has become materially more challenging since 2022. Proactive annual planning — especially bed-and-ISA — is now essential for any investor with a meaningful unwrapped portfolio.