01

The new CGT rates — and how the rate band interaction works

CGT on share disposals is charged at 18% for gains falling within the basic rate band and 24% for gains falling within the higher or additional rate band. The rate is determined not by the gain alone but by the taxpayer's total taxable income plus the gain in the tax year of disposal.

The calculation: first, determine total taxable income (after all deductions and allowances). Second, identify how much of the basic rate band (£37,700 in 2026/27, running from the personal allowance of £12,570 to £50,270) is unused by income. Third, the first slice of gain (up to the unused basic rate band) is taxed at 18%. The remainder is taxed at 24%.

Example: a salaried employee with income of £45,000 (within the basic rate band, £5,270 below the higher rate threshold). They make a £30,000 share gain. After the £3,000 CGT exemption the net chargeable gain is £27,000. The first £5,270 of the gain falls within the remaining basic rate band and is taxed at 18% (£949). The remaining £21,730 falls into the higher rate band and is taxed at 24% (£5,215). Total CGT: £6,164. This taxpayer is at neither the basic nor higher rate exclusively — the blended rate concept catches many investors by surprise.

02

The annual exempt amount — use it or lose it every year

The CGT annual exempt amount (AEA) for 2026/27 is £3,000 per individual. It cannot be carried forward to future years — any unused AEA on 5 April is permanently lost. For a higher rate taxpayer, the AEA shelters £720 of CGT (£3,000 × 24%). For a couple using both AEAs: £1,440 of CGT saved per year at zero cost beyond the disposal.

Bed and ISA: the most effective use of the annual AEA for investors with large GIA portfolios is the annual bed-and-ISA transaction. Sell sufficient shares to crystallise exactly £3,000 of gains (the AEA), then immediately repurchase the same shares inside a stocks and shares ISA using the annual ISA allowance. The sale crystallises the gain tax-free (within the AEA). The ISA purchase means all future growth on those shares is permanently tax-free. Over 10 years with systematic bed-and-ISA, a significant proportion of a GIA portfolio can be migrated into the ISA wrapper at zero CGT cost.

For couples: both partners have a £3,000 AEA. Assets can be transferred between spouses at no gain/no loss (a spousal transfer does not trigger CGT). A couple can therefore transfer assets to the lower-rate partner before disposal, or simply ensure both AEAs are used each year on the jointly held portfolio — doubling the annual tax-free shelter to £6,000.

03

Capital losses — harvesting, carrying forward and the ordering rules

Capital losses from share disposals in the current tax year must be deducted from gains in the same tax year before the AEA is applied. This ordering is important: losses reduce the gain first, and the AEA is then applied to the reduced amount. If losses exceed gains in a year, the excess is carried forward indefinitely against future gains — but only after the AEA of the future year has been applied.

Loss harvesting: a portfolio review before 5 April each year to identify holdings with unrealised losses allows tactical disposals that reduce the CGT liability for that year. A £20,000 unrealised loss on a holding that has underperformed, crystallised before year end, offsets £20,000 of gains from other disposals — saving £4,800 at the 24% higher rate. The loss position can then be re-established by purchasing a similar (but not identical) holding — the UK's 30-day rule (the 'bed and breakfast' rule) prevents buying back the exact same shares within 30 days, but a different fund or ETF tracking the same index is acceptable.

Reporting losses: capital losses on shares must be reported to HMRC to be formally recognised and carried forward. Unreported losses cannot be used. Losses from previous years can be claimed retrospectively up to four years after the end of the tax year in which the loss arose — a higher rate taxpayer who sold at a loss in 2022/23 can still claim that loss on their 2026/27 self-assessment return if it was not previously reported.

04

Spousal transfers and the lower-rate planning strategy

Assets transferred between spouses and civil partners are made at no gain/no loss for CGT purposes — no CGT arises on the transfer itself, and the recipient spouse acquires the asset at the transferor's original cost. This allows gains to be realised at a lower tax rate by transferring assets to the lower-rate partner before disposal.

For a couple where one partner is an additional rate taxpayer (24% CGT) and one is a non-taxpayer or basic rate taxpayer (18% CGT or 0% if gains fall within the personal allowance): transferring assets before disposal can save 6 to 24 percentage points on the relevant portion of the gain. On a £100,000 gain transferred to a non-taxpaying spouse where the entire gain falls within their basic rate band: CGT saving = 24% versus 18% on a portion, or 24% versus 0% if the non-taxpaying spouse's basic rate band fully absorbs the gain.

The non-taxpaying spouse strategy is particularly powerful where one partner has little or no income and therefore has both the £12,570 personal allowance and the £37,700 basic rate band available against capital gains. Up to £50,270 of gains can potentially be sheltered at 0 to 18% for that partner in a single tax year — before any higher rate CGT applies.

05

ISA and pension wrappers — the permanent solution

The most effective CGT strategy is not planning around the tax — it is preventing the tax from arising in the first place by holding investments in tax-advantaged wrappers from the outset. The stocks and shares ISA eliminates CGT and income tax on investments entirely and permanently. The SIPP eliminates CGT and income tax within the wrapper — though income tax applies on pension withdrawals.

For investors with existing GIA portfolios, the migration strategy uses bed-and-ISA annually (£20,000 ISA contribution plus £3,000 AEA per person) to progressively move the portfolio into the ISA wrapper. For a couple, this migration rate is £46,000 per year (both ISA allowances plus both AEAs). A £300,000 GIA portfolio can be fully migrated into ISAs within approximately 7 years — permanently eliminating all future CGT exposure on the transferred assets.

For investments that are not yet in the portfolio — new money or reinvested proceeds — the priority order is always: ISA first (£20,000 per year, tax-free growth and withdrawals), then pension (£60,000 annual allowance, tax-deferred growth, income tax on withdrawal), then GIA (no upfront tax advantage, subject to CGT and income tax on growth and income). Investing in a GIA before maximising available ISA and pension allowances is a systematic failure of tax efficiency that compounds over decades.