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Advanced Taxation (UK) · Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

CGT Rates, Annual Exempt Amount and Loss Planning

Updated 11 October 2026 · Fact-checked

For individuals, gains are taxed at 18% or 24% depending on how much of the basic rate band is unused, after deducting losses and the £3,000 annual exempt amount. Use current-year losses in full first, then only enough brought-forward losses to reduce gains to the annual exempt amount.

Understand CGT Rates, Annual Exempt Amount and Loss Planning

Capital gains tax (CGT) is charged on the gain when you dispose of a chargeable asset. For an individual you work out each gain, then net off losses, then deduct the annual exempt amount, then apply the rate.

The tax tables give two rates: a lower rate of 18% and a higher rate of 24%. Which one applies depends on your taxable income. The basic rate band is £37,700. Any part of it left after taxable income is used by gains at 18%. The rest of the gains are taxed at 24%. Taxable income means income after the personal allowance and other deductions. Gains that qualify for business asset disposal relief are taxed at 14% as set out in the tax tables. Those gains use up the basic rate band first.

The annual exempt amount is £3,000. It is a deduction from net gains. It cannot be carried forward and it cannot create a loss. If you waste it, it is gone. So in planning questions you look for ways to use it, for example by spreading disposals or gifts across tax years, or between spouses.

Losses have two rules that students mix up. Current-year losses must be set against current-year gains in full, even if that takes gains below the annual exempt amount. That wastes the exemption. Brought-forward losses are different. You use only enough to reduce net gains to the annual exempt amount, so none of the exemption is wasted. Losses cannot be set against income in the usual CGT rules, and they are carried forward without time limit once properly claimed.

The exam asks you to compute tax, to advise on timing of disposals, and to choose which gains and losses to match. Always show the rate split clearly. Where a question mentions different asset types, remember the tables you are given list only the 18% and 24% rates, so use those.

Key rules to remember

CGT rates for individuals
Lower rate 18%; higher rate 24%
18% applies to gains within any unused basic rate band (£37,700 less taxable income). 24% applies above that.
Annual exempt amount
£3,000
Deducted from net gains after current-year and brought-forward losses. Not carried forward.
Business asset disposal relief rate
14% on qualifying gains, lifetime limit £1,000,000
Investors' relief has the same rate and limit in the tax tables. Check the conditions in the question.
Net chargeable gain
Gains − current-year losses − brought-forward losses (only as needed) − annual exempt amount
Current-year losses are mandatory. Brought-forward losses are used only to reduce to the exempt amount.
Basic rate band available for gains
£37,700 − taxable income
If taxable income is £37,700 or more, all gains are taxed at 24%. Use 0 as the minimum.

How to solve CGT Rates, Annual Exempt Amount and Loss Planning questions

Use this order for any individual CGT computation involving rates, exemption and losses.

  1. 1List each disposal and compute its gain or loss. Keep losses separate from gains.
  2. 2Total the gains and total the current-year losses. Deduct current-year losses in full.
  3. 3If net gains remain, deduct brought-forward losses only as far as needed to reduce gains to £3,000.
  4. 4Deduct the annual exempt amount of £3,000 (not more than the remaining gain).
  5. 5Work out taxable income after the personal allowance, then find the unused basic rate band: £37,700 less taxable income, not below zero.
  6. 6Tax gains at 18% within that band and 24% above it. If any gains qualify for business asset disposal relief, tax them at 14% and treat them as using the band first.
  7. 7Note any unused losses to carry forward and any wasted exempt amount. Then give planning advice if asked.

Quickest way: Rate-split shortcut

When to use it: When a question gives taxable income and gains and wants the CGT bill fast.

  1. Write the net taxable gain first after losses and the £3,000.
  2. Write £37,700 minus taxable income as the 18% slice.
  3. Take the smaller of the gain and the slice at 18%. Put the rest at 24%.
  4. Add the two figures. Add a line stating losses carried forward.

Common mistakes in CGT Rates, Annual Exempt Amount and Loss Planning

  • Using brought-forward losses to reduce gains to nil

    Students treat all losses the same way.

    Fix: Use brought-forward losses only to reduce net gains to £3,000. Carry the balance forward.

  • Choosing not to use a current-year loss to protect the annual exempt amount

    It feels wasteful to lose the exemption.

    Fix: Current-year losses are set off in full. Plan by timing the disposals into different tax years instead.

  • Using the whole £37,700 band for gains

    Students forget that income uses the band first.

    Fix: Deduct taxable income from £37,700 first. The remainder is the 18% band.

  • Carrying forward the unused annual exempt amount

    Confusion with unused allowances elsewhere, such as pensions.

    Fix: State that the £3,000 is lost if unused. Suggest using it by spreading disposals.

  • Using total income instead of taxable income to find the band

    The personal allowance is overlooked.

    Fix: Deduct the personal allowance and other deductions first, then compare with £37,700.

Worked examples

Example 1

Priya has taxable income of £30,000 for 2025/26. She sells shares for a gain of £25,000 and has no losses. Compute her CGT.

Show the solution
  1. Gain £25,000 less annual exempt amount £3,000 = £22,000 taxable.
  2. Unused basic rate band = £37,700 − £30,000 = £7,700.
  3. £7,700 × 18% = £1,386.
  4. Remaining £22,000 − £7,700 = £14,300 × 24% = £3,432.
  5. Total = £1,386 + £3,432 = £4,818.

Answer: CGT payable is £4,818.

Example 2

Tom has taxable income of £60,000. In 2025/26 he has a gain of £20,000 on shares and a loss of £6,000 on a painting sold in the same year. He also has brought-forward capital losses of £15,000. Compute his CGT and the loss carried forward.

Show the solution
  1. Net current-year gains = £20,000 − £6,000 = £14,000.
  2. Reduce to the annual exempt amount using brought-forward losses: £14,000 − £3,000 = £11,000 of losses used.
  3. Brought-forward losses remaining = £15,000 − £11,000 = £4,000.
  4. Taxable gain = £3,000 less £3,000 annual exempt amount = nil.
  5. CGT = nil.

Answer: No CGT is payable and £4,000 of losses is carried forward. The annual exempt amount is fully used.

Exam tips

  • Show the rate split with the band calculation visible so you earn method marks even if income is wrong.
  • In planning questions, look for wasted annual exempt amounts and suggest using the spouse's allowance or splitting disposals across tax years.
  • Say clearly whether each loss is current-year or brought-forward, because they follow different rules.
  • Take rates and the £3,000 from the tax tables. Do not rely on memory for any other figure.

Practice questions from Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

CGT Rates, Annual Exempt Amount and Loss Planning in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CGT Rates, Annual Exempt Amount and Loss Planning: frequently asked questions

What are the CGT rates for individuals in ATX-UK?

The tax tables give a lower rate of 18% and a higher rate of 24%. Business asset disposal relief and investors' relief gains are taxed at 14%, up to a £1,000,000 lifetime limit.

How much is the annual exempt amount?

It is £3,000 in the tax tables. It is deducted after losses and cannot be carried forward.

Can I choose which losses to use against gains?

Not for current-year losses, which must be used in full. Brought-forward losses are used only as far as needed to reduce gains to the annual exempt amount.

Does the rate depend on the asset type?

The tables supplied list only the 18% and 24% rates and the 14% relief rate. Use these and any instruction in the question.