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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    CGT Annual Exempt Amount (AEA)

    The CGT Annual Exempt Amount (AEA) is the tax-free band applied annually to capital gains. **2025/26: £3,000 per individual** (reduced from £6,000 April 2023, from £12,300 April 2020, a major reduction over 4 years reflecting Treasury policy to broaden the CGT base). Available to ALL UK taxpayers per tax year, not income-band-tested. NOT transferable / poolable across years, use-it-or-lose-it annual allowance. Trusts have a SEPARATE smaller AEA (half the individual rate = £1,500 in 2025/26, shared across multiple trusts of same settlor). Joint owners each get OWN AEA against their share of any gain (couples disposing of jointly-owned property benefit from £6,000 combined AEA). Gains above AEA taxed at: **residential property 18% basic / 24% higher**; **all other assets 18% basic / 24% higher** (non-residential rates aligned upward from 10%/20% on 30 October 2024).

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    What this relief is, in plain English

    The CGT Annual Exempt Amount is the universal nil-rate band on capital gains, £3,000 in 2025/26, materially reduced from the £12,300 peak in 2020-2023. Combined with the October 2024 CGT rate increases on non-residential assets (10%/20% → 18%/24%), the UK CGT regime has tightened substantially in recent years. Use-it-or-lose-it annually. Per individual (couples each get own £3,000). Joint asset owners share is per-share-then-per-individual-AEA. Trusts get half rate (£1,500). Gains above AEA taxed at 18%/24% for both residential + non-residential as of 30 October 2024 (unified rate structure). Strategic planning: time disposals across tax years where economically possible to absorb gains within £3,000/year AEA. Use spouse-shifting (transferring assets to lower-CGT-band spouse before disposal, no-gain-no-loss between spouses). Combine with specific reliefs where applicable: PRR (main home), SEIS/EIS (early-stage investments), BADR/Investors' Relief (qualifying business exits), SSE (corporate disposals). For modest accidental gains (small share sales, occasional crypto profit), the £3,000 AEA still provides meaningful annual cover, particularly when combined with disposal-timing planning across years.

    How it works

    £3,000 annual nil-rate band

    Total net capital gains in tax year (gains minus losses) × NIL up to £3,000. Excess subject to CGT at applicable rate (18% basic / 24% higher for both residential + non-residential post-October 2024). Use-it-or-lose-it per year; not transferable.

    Joint owners, each own AEA

    Joint asset owners each get own £3,000 against own share of gain. Couples jointly selling: combined £6,000 AEA. Unequal beneficial ownership requires pre-disposal Form 17 declaration.

    Trusts, half rate

    Trusts get £1,500 AEA (half the individual rate). Shared across multiple trusts created by same settlor, anti-avoidance prevents AEA multiplication via trust proliferation.

    Rate alignment + 60-day reporting interaction

    From 30 October 2024: non-residential CGT rates increased from 10%/20% to 18%/24%, now matching residential. Single rate structure across asset types. Residential property gains still require 60-day CGT reporting (separate from annual SA); other gains reported via annual SA only.

    Who qualifies

    Interactions with other reliefs

    PRR + Letting Relief

    PRR exempts main-home gain first; AEA applies to any taxable residual. PRR-only sales rarely engage AEA; partial-PRR sales (former main + let scenarios) use both reliefs sequentially.

    SEIS + EIS

    SEIS shares CGT-exempt after 3 years if income tax relief retained; EIS shares same. SEIS reinvestment relief permanently exempts 50% of reinvested gains. AEA applies to residual taxable portion only.

    BADR + Investors' Relief

    BADR + Investors' Relief at 14%/18% on qualifying gains (£1m lifetime cap each). AEA applies to first £3,000 of taxable gain before BADR/IR rate applies.

    60-Day CGT Reporting

    Residential property disposals with taxable gain (after PRR + Letting Relief + AEA) must report + pay within 60 days. AEA absorbs first £3,000, small residential gains may fall entirely within AEA + escape 60-day reporting.

    Common mistakes + audit triggers

    Worked example

    Penelope, Norwich - Higher-rate-band investor with mixed share + crypto disposals 2025/26 (2025/26)

    Penelope's 2025/26 disposals: sold listed shares for £15,000 gain; sold crypto holding for £4,500 gain; bought + sold short-term crypto trade for £1,500 LOSS. Total net gains 2025/26: £15,000 + £4,500 - £1,500 = £18,000.

    Calculation: **Net gains £18,000.** Less AEA: £3,000. **Taxable gains: £15,000.** Higher-rate CGT 24% (post-October 2024 rate alignment): 0.24 × £15,000 = **£3,600 CGT**. **Counterfactual: pre-April 2020 (£12,300 AEA + 20% higher non-residential rate):** Taxable: £18,000 - £12,300 = £5,700. CGT at 20%: £1,140. **Pre-2020 vs current: £2,460 additional CGT** on same scenario, driven by both AEA reduction (£12,300 → £3,000) + rate increase (20% → 24%). **Spouse-shifting strategy:** If Penelope had transferred 50% of shares + crypto holdings to her spouse Hugo (basic-rate position) pre-disposal: - Each spouse's gain: £9,000 - Each uses own £3,000 AEA: taxable per spouse £6,000 - Hugo's basic rate 18% × £6,000 = £1,080 - Penelope's higher rate 24% × £6,000 = £1,440 - **Combined household tax: £2,520** (vs £3,600 if all in Penelope's name) - **Saving via spouse-shifting: £1,080** **Process:** 1. Transfer assets to Hugo before disposal (spouses transfer at no-gain-no-loss, base cost preserved). 2. Each spouse disposes own holding. 3. Each files own SA (separately for joint disposals). 4. Each pays CGT on own share at own band rate. **Strategic note:** For couples with materially different income bands (e.g. higher-rate vs basic-rate spouse), spouse-shifting before disposal saves substantial CGT. Annual AEA usage on disposal-timing planning + spouse-shifting are the two main universal CGT planning techniques.

    Statute reference: Taxation of Chargeable Gains Act 1992 + Finance Act 2023 (reduction) TCGA 1992 s.3 (Annual Exempt Amount). HMRC manual: CG18000 onwards.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    What was the AEA in earlier years + why the rapid reduction?+
    Trajectory: 2019/20 = £12,000; 2020/21 = £12,300 (peak); 2021/22 + 2022/23 = £12,300 (frozen); 2023/24 = £6,000 (50% cut); 2024/25 onwards = £3,000 (further 50% cut). Total reduction 2020-2024: ~76%. Treasury rationale: broaden CGT base, encourage realisation timing, reduce relief perceived as benefiting wealthy. Practical impact: more individuals now have taxable capital gains they previously would have absorbed via AEA. Modest gain disposals (e.g. small share sale, modest crypto profit) now generating CGT bills + needing Self Assessment reporting where previously they wouldn't.
    Can I bank unused AEA across years?+
    No, AEA is strictly use-it-or-lose-it per tax year. Unused 2024/25 AEA cannot be carried into 2025/26. Strategy: time disposals to spread gains across multiple tax years if economically possible. Selling assets generating ~£3,000 of annual gain each year is the optimal pattern for absorbing within AEA without CGT. Bunching disposals into one year wastes AEA on the slice that fits but pays CGT on the rest.
    Do joint owners share one AEA or each get their own?+
    Each owner gets own £3,000 AEA against their share of the gain. Joint owners of property selling: each spouse / co-owner calculates own share of gain + applies own £3,000 AEA + reports own taxable portion. Couples jointly selling a BTL: combined £6,000 AEA available across the household. Form 17 declarations for unequal beneficial ownership between spouses must have been filed pre-disposal to affect the split.
    Does AEA apply to crypto / share / business disposals?+
    Yes, applies to ALL CGT disposals regardless of asset class. Crypto disposals at gain, share sales, BTL sales, business asset disposals (where BADR or SSE don't apply), all benefit from £3,000 AEA before CGT calculation. Where multiple disposals in one year: AEA applies to total NET gains for the year (gains minus losses), not per-disposal. Specific reliefs (PRR on main home, SEIS / EIS CGT exemption, BADR / Investors' Relief reduced rates, SSE for corporates) interact with AEA on the residual taxable portion.

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