Guide · Personal Tax
UK CGT Annual Exempt Amount: From £12,300 to £3,000 — the History and What It Means for You
Between April 2022 and April 2024, the Capital Gains Tax annual exempt amount (AEA) was slashed from £12,300 to £3,000 — the most aggressive contraction in the allowance's history. Two halvings in two years pulled an estimated 260,000 extra individuals into the CGT net, hitting small share investors, buy-to-let landlords, second-home sellers and crypto holders especially hard. The £3,000 ceiling is now frozen indefinitely, which means real-terms erosion through inflation every year. This guide traces the full history of the AEA, explains who is affected by the cut, walks through worked impact examples, and sets out the practical strategies — Bed-and-ISA, spouse transfers, gain-splitting across tax years and loss harvesting — that still work under the tighter regime.
- 2022/23 AEA: £12,300 (frozen since 2020).
- 2023/24 AEA: £6,000 (halved).
- 2024/25 and 2025/26 AEA: £3,000 (halved again, then frozen).
- Reporting: SA needed if gains exceed AEA or total proceeds exceed £50,000.
- Best surviving strategies: Bed-and-ISA, spouse transfers, tax-year gain splitting, loss harvesting.
The AEA collapse, 2022-2025
The annual exempt amount is the tax-free slice of net chargeable gains an individual can realise each tax year. In the November 2022 Autumn Statement, Chancellor Jeremy Hunt announced a two-step cut: from £12,300 to £6,000 on 6 April 2023, then from £6,000 to £3,000 on 6 April 2024. Neither figure was indexed. The £3,000 floor stays in place for 2025/26 and is frozen indefinitely under current legislation.
In percentage terms this is a 75.6% nominal cut over 24 months — the largest contraction of the CGT allowance since it was introduced in 1965. To put that in context, the AEA had never previously been cut at all in the post-1990 era: it had only ever risen with inflation or been frozen. HMRC's published policy paper accompanying the announcement estimated 260,000 additional individuals and trusts would fall into CGT each year from 2024/25 onwards, raising roughly £1.6bn of additional receipts by 2027/28.
Crucially, no compensating change was made to the rate structure. Individuals continue to pay 18% on gains within the basic-rate band and 24% above (rates aligned upwards by the Autumn Budget 2024). So the AEA cut is a pure tax rise: more gains in scope, taxed at the same headline rates.
Historical context: the AEA from the 1980s to today
The AEA had drifted gently upward for nearly four decades. The table below collects the headline figure at the start of each tax year for individuals (trustees historically receive half).
| Tax year | Individual AEA | Notes |
|---|---|---|
| 1982/83 | £5,000 | Indexation linkage introduced with rebasing to March 1982. |
| 1990/91 | £5,000 | Independent taxation of spouses began — each got their own AEA. |
| 1999/2000 | £7,100 | Taper relief era; AEA broadly tracked RPI. |
| 2008/09 | £9,600 | Taper relief abolished; flat 18% rate introduced. |
| 2014/15 | £11,000 | First year above £10k. |
| 2019/20 | £12,000 | Last pre-freeze increase. |
| 2020/21 — 2022/23 | £12,300 | Frozen for three tax years. |
| 2023/24 | £6,000 | First halving (Autumn Statement 2022). |
| 2024/25 | £3,000 | Second halving. |
| 2025/26 | £3,000 | Frozen indefinitely under current law. |
For most of the AEA's history it was either nominally rising with inflation or frozen. The 2023-2024 cuts broke that long pattern: not just frozen but actively reduced, and reduced steeply.
Who is hit hardest
The AEA cut disproportionately affects taxpayers who realise modest gains regularly rather than occasional six-figure gains. The threshold groups most exposed:
- Small share investors in General Investment Accounts (S&S GIAs) — anyone holding listed shares or ETFs outside an ISA. Even a £30-50k portfolio can easily breach £3,000 on a rebalance.
- Second-property owners disposing. A second home with even modest capital appreciation routinely realises £30k+ gains; the AEA used to absorb a meaningful slice, now barely a rounding.
- Buy-to-let landlords selling. Combined with Section 24 mortgage-interest restrictions and higher CGT residential rates, landlords face the squeeze from both income tax and CGT.
- Crypto holders. Active traders trip the £50k proceeds reporting threshold extremely easily — every token-to-token swap is a disposal.
- Holders of legacy share portfolios. Decades-old share certificates outside any wrapper, often inherited, with embedded gains that are now expensive to crystallise.
- Discretionary trusts. Trustees get half the individual AEA — now just £1,500 — and pay the higher 24% rate immediately on any excess.
By contrast, ISA and SIPP holders are largely insulated: gains inside those wrappers are not chargeable at all. The cut therefore accelerates the wrapper-vs-no-wrapper differential and gives the already-wealthy ISA-using population a structural advantage.
Worked impact example
Consider an investor who holds a £40,000 share portfolio in a General Investment Account and realises a 10% gain on a rebalance — a £4,000 net chargeable gain. They are a higher-rate taxpayer with no other CGT activity.
| Tax year | AEA | Taxable gain | CGT at 24% |
|---|---|---|---|
| 2022/23 | £12,300 | £0 | £0 |
| 2023/24 | £6,000 | £0 | £0 |
| 2024/25 | £3,000 | £1,000 | £240 |
| 2025/26 | £3,000 | £1,000 | £240 |
The same £4,000 gain that was entirely tax-free in 2022/23 now costs £240. A "quiet" tax rise of £240 on a £4,000 gain is an effective 6% on the gross gain — equivalent to surrendering more than half a year of typical dividend yield.
The £50,000 proceeds reporting threshold
Pre-2024, the rule was simple: report CGT on Self Assessment if total gains exceeded the AEA. From 2023/24 onwards, two separate triggers apply, and you must report if either is breached:
- Total taxable gain (after AEA) is greater than zero, or
- Total proceeds from disposals exceed £50,000 — even if the net gain is below the AEA.
The £50,000 proceeds limit replaced the old four-times-AEA rule (which had been roughly £49,200 against the £12,300 AEA — a coincidence). Under the new test, an investor selling £30k of one fund and £25k of another in the same tax year has £55k of proceeds and must file an SA108, even if the combined gain was just £1,500. Many more taxpayers are now in CGT reporting scope as a result.
For residential property disposals, an additional 60-day "real-time" CGT return and payment on account is required within 60 days of completion — that obligation is independent of Self Assessment and applies even where the year-end SA108 would not be needed.
Strategies that still work
1. Bed-and-ISA
Bed-and-ISA is the single most efficient post-cut strategy for ordinary investors. The mechanics: sell holdings from your General Investment Account, contribute the cash to your ISA (counts against the £20,000 annual subscription), then immediately repurchase the same shares inside the ISA. The disposal crystallises a gain — which uses your AEA, or matches against carried-forward losses — and the position lives the rest of its life inside a tax-free wrapper.
Done annually, Bed-and-ISA migrates a sizeable GIA into an ISA over 5-10 years without ever paying CGT — provided the realised gains stay within the £3,000 AEA each year. Most retail platforms now offer a one-click Bed-and-ISA service that minimises the cash leg, typically 0.5-1.0% spread cost.
2. Inter-spouse transfer
Transfers between spouses and civil partners living together are no-gain-no-loss: the recipient inherits the original base cost without any CGT being charged on the transfer. The receiving spouse can then dispose and use their own £3,000 AEA plus their own basic-rate band.
For a married couple, this effectively doubles the household AEA to £6,000 and can drop part of the gain from the 24% higher rate into the 18% basic rate if one spouse has unused basic-rate band. Cohabiting but unmarried partners do not qualify. The transfer must be a real legal transfer of beneficial ownership, not a paper exercise.
3. Gain-splitting across tax years
Each tax year has its own AEA. A £6,000 gain realised on 1 March uses one AEA; the same £6,000 gain realised £3,000 on 31 March and £3,000 on 6 April uses two AEAs and may save up to £720 (£3,000 × 24%).
Two cautions: the 30-day matching rule (see below) blocks naïve same-share repeats, and the disposal date for CGT is the date of the legally binding contract — not settlement. For listed shares this is generally the trade date, but conveyancing on property can drift.
4. Loss harvesting
Allowable capital losses are set against gains of the same tax year before the AEA, and excess losses carry forward indefinitely (subject to claiming them within four years). Realising a paper loss before year-end banks a future shield.
Important quirk: same-year losses are mandatory — they cannot be parked. If realising a loss in March would waste your AEA, defer the loss to the next tax year. Carried-forward losses are used only after the AEA, which preserves the allowance and is far more efficient.
5. Tax-favoured wrappers
ISAs, SIPPs, premium bonds and qualifying EIS/SEIS investments are all CGT-exempt to some degree:
- Stocks & Shares ISA: £20,000 annual subscription, all gains and dividends tax-free for life.
- SIPP / personal pension: all gains tax-free; only the eventual drawdown is taxed as income.
- EIS: 30% income-tax relief on subscription + CGT deferral on reinvested gains + CGT exemption on EIS shares held 3+ years.
- SEIS: 50% income-tax relief + 50% CGT reinvestment relief + CGT exemption.
- Premium bonds: all winnings tax-free, though not strictly a CGT shelter (no gains).
The 30-day Bed-and-Breakfast rule
HMRC's share-matching rules block deliberate "bed-and-breakfasting" — selling and re-buying the same shares to crystallise a gain (or loss) for the AEA without changing economic exposure. Under TCGA 1992 s.106A, disposals are matched in this order:
- Shares acquired on the same day as the disposal.
- Shares acquired in the next 30 days (the bed-and-breakfast block).
- The general s.104 pool — average base cost of all earlier acquisitions.
So selling 1,000 BP shares on 31 March and re-buying 1,000 BP on 6 April matches the sale to the re-purchase, leaving the cost basis essentially unchanged and crystallising no gain — defeating the attempt to use the AEA.
Bed-and-ISA escapes this because the new holder (the ISA wrapper) is legally a different beneficial owner for CGT matching. The same is true of inter-spouse transfer followed by spouse repurchase (the spouse is a different taxpayer). Both strategies are well-established and uncontroversial — they achieve a real change of ownership, not just a paper round-trip.
Worked planning example: a couple realising £12,000
A married couple jointly hold a £100,000 GIA. They want to realise £12,000 of gain to fund part of their early retirement. Both are basic-rate income taxpayers with full unused basic-rate band, so all gains would fall in the 18% CGT band.
Strategy A — single tax year, joint use of AEAs
First, transfer 50% of the relevant holdings to the lower-AEA spouse via no-gain-no-loss inter-spouse transfer. Each spouse then disposes of £6,000 worth of gain in the same tax year. Each uses £3,000 AEA, leaving £3,000 each taxable.
Total taxable gain = £6,000. CGT at 18% = £1,080.
Strategy B — spread over two tax years
Same inter-spouse split. Each spouse realises £3,000 of gain on 1 April (within current tax year, AEA covers all of it) and another £3,000 on 6 April (new tax year, fresh AEA, again covers all of it). Four AEAs of £3,000 = £12,000 of fully sheltered gains.
Total taxable gain = £0. CGT = £0.
Strategy B saves the full £1,080 simply by straddling 6 April. The only constraint is the 30-day rule if the spouses want to repurchase the same shares — Bed-and-ISA or a switch into a different fund sidesteps that. Five days of patience around the tax-year boundary is one of the highest hourly rates in personal finance.
The frozen AEA and fiscal drag
The £3,000 AEA is frozen indefinitely. With CPI inflation running 2-3% annually, the real-terms value erodes each year. Compounding at 2.5%, the £3,000 of 2025 is worth roughly £2,500 in today's money by 2030, and £2,200 by 2035. Asset values, by contrast, will continue to rise nominally — so the same real gain consumes a larger nominal slice of the (shrinking) allowance.
This is textbook fiscal drag: a chancellor raises real-terms tax without any nominal change in the headline figure, simply by leaving the threshold static while inflation, wages and asset prices march on. The IFS estimated the long-run revenue from the AEA cut at roughly £1.6bn per year by 2027/28; the frozen real-terms erosion adds materially on top.
gov.uk references
- gov.uk/capital-gains-tax/allowances — current and historical AEA figures.
- gov.uk/capital-gains-tax/rates — 18% / 24% rate split.
- HMRC Capital Gains Manual CG10000+ — the technical framework.
- HMRC CGM CG12700 — share matching and the 30-day rule.
- HMRC CGM CG18000 — annual exempt amount in detail.
- HMRC policy paper, "Capital Gains Tax — reducing the AEA", November 2022 — official impact assessment.
- Self Assessment SA108 — capital gains pages and notes.
Bringing it together
The AEA cut from £12,300 to £3,000 is the most consequential change to ordinary investors' tax position in a decade. It hits modest, regular realisations hardest — exactly the rebalancing-and-tidying behaviour that good investors engage in. The defensive playbook is mature: Bed-and-ISA to migrate holdings into wrappers, inter-spouse transfer to use two AEAs and two rate bands, gain-splitting around 6 April, and disciplined loss harvesting. None of these are aggressive avoidance — they are mainstream housekeeping, recognised by HMRC and built into every platform. The lesson is structural: in the £3,000-AEA era, the wrapper architecture you set up matters far more than the individual investment decisions inside it.