10 practical ways to reduce your capital gains tax

Preserving wealth and growing your net worth requires actively reviewing both your finances as well as tax exposure. As such, you’ll likely be continually assessing which assets from your portfolio are delivering desired results and which may need to be replaced with better yielding options. Yet doing this is not always as cost-effective when you become subject to Capital Gains Tax (CGT) which is why this article aims to provide practical strategies to help you minimise your liability as you build your fortune.

What is CGT?

CGT, short for capital gains tax, is a tax due when you make a gain from disposing of qualifying assets. It can be incurred even when you gift your assets outright such as signing over property to your children or handing down part of a business to them. Not only that, but in these situations, there is always still the possibility of attracting inheritance tax as well further down the line. In other cases, such as if you were to sell collectibles to an antiques dealer – this could still result in a CGT bill but more unlikely to result in an inheritance tax liability. However, CGT only applies to the gain made from the date of disposal compared to the value of the asset when you first acquired it. Depending on your personal tax band, CGT is charged at either a rate of 18% or 24%.

Do I always have to pay CGT?

There are several instances where you may be exempt from CGT. Firstly, any gain made which is covered by the Annual Exempt Amount means there will be no tax due. For the current tax year 2025/26 this annual allowance is £3,000. Secondly, some asset disposals are exempt altogether, no matter how much gain you have made, such as with your primary residence. Although there are some conditions which must be met for this to be the case, should you not fully qualify, there are still tax reliefs for homeowners available that could substantially reduce your CGT bill should one arise. Thirdly, in most instances, any transfers or disposals made between married spouses or civil partners are exempt from CGT. The one exception that may impact this is where transfers are made due to divorce proceedings.

Why is CGT becoming more of an issue?

Whilst only a small population of UK taxpayers are ever expected to pay CGT, the revenue raised from is equated to £12.1 billion for the 2023/24 tax year and is predicted to increase to £13.3 billion by the 2025/26 tax years. This means that if you’re one of the very few that needs to pay CGT, you could be at risk of a substantial bill unless you consider solutions to reduce your liability.  However, it is also expected that due to the falling CGT threshold combined with increasing property prices that more and more people will be drawn into the scope of CGT and so careful tax planning will be more important than ever.

10 ways to reduce your capital gains tax

For investors, landlords, and business owners, CGT can become a significant cost if not managed carefully. Therefore, before you sell or restructure an asset, it’s worth considering the planning opportunities that already exist within HMRC rules. Our accountants have outlined their top ten practical ways to minimise your CGT liability:

1. Don’t miss out on the annual exemption

The annual CGT exemption allowance is £3,000 and cannot be carried forwards if not utilised in full. So, when evaluating your assets and considering making disposals, you may want to spread these out across multiple tax years where possible to get the most benefit of the annual exemption. For shorter term disposals, you may want to time these between two financial years – so, one no later than 5^th April and the other after 6^th April. Don’t forget that you must claim the annual exemption as it is not given automatically and to do this you will need to report your gain either through a 60-day capital gain tax return (specifically for the sale of properties), the real-time online return portal, or through your annual self-assessment tax return.

2. Utilise the spousal exemption

Where you have already fully utilised your own annual exemption, an effective strategy to minimise the CGT payable is to utilise your spouse or partner’s allowance if this is available. The spousal exemption means that any transfers made between married couples or civil partners are exempt from any CGT. If they have not used their own annual allowance, then it is possible for you to transfer an asset for them to dispose of to save £3,000 from the tax bill. However, in order for this to be successful the transfer must be genuine. If assets require formal documentation of ownership, then this must be completed such as deeds for property or registration of share certificates. Other items such as antiques or jewellery may not have such documents of ownership but it still remains that the transfer must be genuine so that your spouse can truly do what they wish with the asset, in these situations having a Deed of Gift drawn up is a good idea. HMRC do have the powers to dispute this if they suspect the transfer was purely made to dodge taxes.

3. Offset gains with strategic capital loss

Whilst we all hope that our investments will bring about impressive returns, it is certainly not always the case. Nevertheless, these can still be used to your advantage if disposals are timed well. Disposing of assets at a loss will allow you to offset this loss against any future gains. Unlike with the annual exemption, capital losses can be carried forward indefinitely (providing it has been reported within the allowed timeframes). They can also only be offset against capital gains, not income. So, for example, if you purchased shares for £10,000 but sold them at a loss for £2,000, this would give you a capital loss of £8,000. If later down the line sold a collection of valuable artwork for £80,000 which originally cost you £25,000 to purchase, the gain of £55,000 would be subject to CGT. This could be reduced by your loss of £8,000 therefore reducing the taxable gain to £47,000. A note from our team reminds you to ensure you seek out expert advice when disposing of assets, as there may be allowable expenses that could reduce your CGT bill further.

4. Shelter investments from tax with ISA products

All gains made within ISA accounts are exempt from CGT so it’s a sensible tactic to allocate some of your resources into these types of products. Currently, you’re entitled to pay in as much as £20,000 per tax year into ISAs. It is worth clarifying that this allowance applies to all different types of ISAs including cash, stocks and shares, and lifetime ISAs. Since the 2025 Autumn Budget limits to how much under 65s can pay into a cash ISAs have also been introduced but the overall total limit across cash and stock and shares remains £20,000To further make use of ISAs, you may wish to open junior ISA accounts for your children. Up to £9,000 can be invested into these accounts per tax year and again all gains made are tax-free making this a worthwhile option if you want to prioritise building a nest egg for your children’s financial future.

5. Consider SEIS/EIS investments

An essential element of a robust financial plan is having a diversified investment portfolio. Therefore, you may want to look into investing into companies that are eligible under the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS). Both are HMRC approved tax schemes aimed to support high-risk business ventures by offering generous tax breaks to willing investors. By investing in these types of companies, any gain made will be exempt from CGT (so long as qualifying conditions are met). In addition, there is also 30% – 50% income tax relief (depending on the scheme) offered up front when you make your initial investment. Not only that but the scheme protects investors one step further – should you incur a loss on your investment there is loss relief available to help reduce the financial impact. Under SEIS, if you invest £10,000, you can claim 50% income tax relief (£5,000). If the investment fails, you can claim loss relief on the remaining £5,000 (the amount lost after income tax relief) at your marginal income tax rate. For example, if you’re a 45% taxpayer, 45% of £5,000 (£2,250) can be claimed as relief, reducing your effective loss to £2,250.

6. Reduce your CGT rate by making pension contributions

One way to reduce your CGT effectively is to ensure gains are charged at the lower rate. CGT rates are dependent upon your personal income tax band. Basic rate income taxpayers are charged at 18% whilst higher and additional rate income taxpayers are charged at 24%. Of course, simply reducing your income is not an appealing prospect nor a practical solution, however it is possible to make pension contributions which is then treated as reduced income. For example, if you are earning a salary of £75,000, this would put you in the higher CGT rate as a higher income taxpayer. However, were you to make £30,000 worth of pension contributions, this would allow you to save for the future whilst also reducing your current income tax band to the basic rate band meaning disposals (or part of your disposal) can now be charged at the lower rate. Here, it is important to understand that if your disposal results in a gain that pushes you back over the basic rate income threshold (£37,700 – discounting the personal allowance as this only applies to income and not gains) then anything over will be subject to the higher CGT tax rate.

7. Another way to reduce your CGT rate is to make charitable donations

Although making pension contributions is an efficient way to reduce your income tax band (and therefore your CGT rate) whilst saving for the future, it does have limitations. The maximum amount you can put into a pension scheme per tax year is £60,000 or 100% of your annual net relevant earnings (whichever is less). It is possible to carry this allowance forward so if you have not made contributions in the past 3 years it is possible to put in more, but for many high-net-worth individuals this option can still be exhausted. If this is the case, you can then still effectively lower your income by making charitable donations. Doing so works in a similar way to making pension contributions. So, this time, let’s say your annual income is £120,000 and you have already contributed £60,000 into your pension pot. You remain in the higher rate tax band, but you can reduce this further by making charitable donations to causes you wish to support. Donating £15,000 can then put you comfortably in the basic rate income tax band, once again lowering your CGT rate. Don’t forget that the same rule will still apply where if you gain together with your income pushes you over the basic rate threshold then part of that gain will be subject to the higher CGT rate.

8. Reinvest without suffering a tax bill with Rollover Relief

If you’re a business owner with significant business assets, then you should make the most of using Rollover Relief when it comes to restructuring your assets. Rollover Relief is an effective way to defer CGT therefore improving your cash flow position which can be crucial particularly when you are expanding or updating your business operations. The tax relief allows you to defer any immediate tax on gains incurred when you sell qualifying business assets so long as the proceeds of the sale are used to purchase further qualifying business assets. For example, say you own a factory which you sell and make a gain of £300,000. Ordinarily this gain would result in a CGT bill, however if you use this money to buy a warehouse that you will use for your business then you can defer your CGT payment until the warehouse is sold at some point in the future (and the proceeds are not reinvesting in a qualifying business asset). If the warehouse cost £950,000 to purchase, the base cost when it comes to calculating CGT when it is sold will instead be calculated as £650,000 because the gain from the factory is “rolled over” into the new business asset. Rollover Relief is also available when it comes to disposing of unlisted trading shares so long as they are reinvested in another unlisted trading shares. For business owners, it provides flexibility to modernise, expand, or reposition their businesses without the drag of CGT on each transaction. For investors holding qualifying shares, it can support the transition into new opportunities while maintaining tax efficiency. While the gain isn’t wiped out entirely, the ability to defer it, often for many years, gives individuals more control over when and how they crystallise the eventual tax liability.

9. Exit a business with less of a tax burden using Business Assets Disposal Relief

For business owners looking to exit rather than reinvest, Business Asset Disposal Relief (BADR) can be one of the most effective ways to reduce CGT. BADR applies to disposals of qualifying business assets, whether you operate as a sole trader, partner in a partnership, or shareholder in a trading company. The relief allows qualifying gains to be taxed at a reduced rate of 14% but this is due to increase to 18% come April 2026. The relief is subject to a lifetime limit of £1 million of qualifying gains so be sure to seek out professional advice in order to structure disposals tax-efficiently. To qualify, you must have owned the business or shares for at least two years and been actively involved in running it during that period. For partnerships and sole traders, the business itself must have been trading. Unlike rollover relief, which only defers CGT, BADR provides a permanent reduction in tax, helping owners retain more of their wealth when selling or winding down their business.

10. External investors should claim Investors’ Relief

Finally, some advice for external investors. Investing in unlisted trading companies can be high-risk, but it can also bring high rewards. So, it’s understandable that after taking that risk, seeing your gains eroded by hefty CGT can leave a bitter taste. This is where Investors’ Relief (IR) comes in.IR allows qualifying investors to benefit from a more favourable 14% CGT rate on their gains. To qualify, you must be an external, non-employee shareholder and have held the shares for at least three years before selling. The company must be a genuine unlisted trading business, not an investment vehicle, and the shares must have been newly issued when acquired. Although the IR rate is set to increase to 18% in April 2026, it will still offer a significant saving compared with the standard 24% rate faced by most higher and additional rate taxpayers on typical asset disposals. The main limitation is the £10 million lifetime cap, so it’s important to plan disposals with a long-term view rather than focusing solely on individual transactions.

Get help with your capital gains tax planning

Capital Gains Tax doesn’t have to be a burden if you plan carefully. Effective CGT planning allows you to preserve more of your wealth, reinvest in your business or portfolio, and achieve your lifestyle and financial goals with confidence. Our team are on hand to help you realise this so if you’d like to explore strategies specifically tailored to your personal circumstances, please use our online form to book in for a consultation.