How to reduce Capital Gains Tax on property and investments
01 April 2025
In this blog post, we will explore the impact upcoming Capital Gains Tax changes will have on investments, property, and gifting, along with discussing how investors may be able to reduce CGT on these transactions throughout the 2026/2027 tax year.
Please note: many of the ideas in this blog post involve an element of investing. As is the nature with investing, your capital is at risk, and you may not receive back the same amount you put in when you choose to cash out your savings. In addition, the ideas set out in this blog post are based on our current understanding of UK legislation, impacting only those within the UK tax system.
What is Capital Gains Tax?
Capital Gains Tax (CGT) in the UK is a tax imposed on the profit made from the sale or disposal of assets, such as property, shares, or fund-based investments, that are sold for more than the original purchase price. The difference between the purchase price and the sale price is deemed to be a gain – on which the tax is due. The rate of tax you pay will depend on your level of earnings and the type of asset you are selling (i.e., property or equities).
CGT is charged at a rate of 18% for non or basic rate taxpayers and 24% for higher or additional rate taxpayers. However, CGT for second homes or buy-to-lets is charged at 18% and 28%, respectively.
There is currently a tax-free allowance per person of £3,000 for gains in the tax year before CGT is payable.
Shaun Robson
Partner, Head of Wealth Planning
Capital at Risk
Capital at Risk
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Making the most of tax-free allowances
Its important to ensure that your investments are protected by tax-wrappers such as stocks & shares ISAs and pensions, but most tax-wrappers offer the benefit of sheltering your investments from CGT. For most clients, we recommend utilising your ISA and pension allowance each year as an absolute priority for anyone looking to maximise the return on their investments and reduce the “tax drag” on their returns.
In addition to investments held within tax wrappers, there are certain investments that are exempt from CGT. UK Government Bonds (otherwise known as GILTs) are exempted from CGT. Other specific tax-incentivised investments may also be excluded, such as qualifying Employee Share Schemes and Venture Capital Trusts (VCTs). Please note: these types of investments may carry a higher level of risk, and we recommend speaking to your Adviser to understand whether they will be suitable for your portfolio.
It is important to note that the dividend allowances is £500.
| Allowance/threshold amount | Current |
|---|---|
| Dividend Allowance | £500 |
| Capital Gains Allowance (CGT) | £3,000 |
How can investors reduce CGT on investments ?
You can take several steps to try to mitigate the tax impact including:
- Making use of the annual exempt amount you do have.
- Making use of any capital losses from previous years – capital losses need to be recorded via self-assessment tax return or declaration. You normally have four years from the end of the tax year when you want to make the claim to record the losses.
- Considering utilising spousal allowances by transferring assets between you to sell in each name – thereby utilising twice the allowance, as transfers between spouses are tax-free.
- Ensuring you are utilising your tax-wrapper allowances to make the most of future savings on CGT and income tax.
Understanding the impact of CGT
There is generally an exemption from Capital Gains Tax (CGT) on an individual’s main residence, meaning most homeowners will not face CGT when selling their primary property. However, landlords and individuals who own second homes may be liable for CGT on any gain made when those properties are sold.
It is also important to note that gifting an asset—such as shares or property—is treated as a disposal for CGT purposes. This means the person making the gift may realise a gain and potentially incur a CGT liability at the time of the transfer. The recipient of the gift acquires the asset at its market value at the date of the gift, which becomes their new base cost.
In some circumstances, this can result in both CGT implications at the time of the gift and potential Inheritance Tax (IHT) considerations if the donor dies within seven years.
Our blog post on gifting and the potential IHT implications explores this scenario in further detail.
Capital at Risk
Capital at Risk
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
How can investors reduce CGT on property in the 2026/2027 tax year?
Unlike investments into equities or funds, properties are much more difficult to offset the gains on. Most tax-wrappers do not allow for properties to be held within them, with the exception of more bespoke options such as Small Self-Administered Schemes (SSASs), which are a form of pension. However, it is still important to consider the use of brought forward losses and spousal exemptions to mitigate CGT.
How we can help structure your finances to reduce CGT
Capital Gains Tax can create a drag on your investment returns in the region of 20%. By planning strategically to reduce this tax, you can significantly improve the odds of meeting your financial ambitions and maximise your family’s wealth. Whether you are liable to pay CGT on investments, property, or other assets, our Wealth Planning experts can help you to save, plan, and invest using the most suitable and tax-efficient methods.
Effective Tax Planning is integral to our Wealth Planning process. This is also why we offer an integrated Wealth Management service across planning and investing, as we believe working with a Wealth or Financial Planner is the most effective way to make your finances go further.
Contact us
You may also like...
Sign up to our newsletter
Sign up to receive the latest news from Killik & Co, including our Market Update and Killik Explains educational videos, and be one of the first to hear about upcoming events and webinars. You can unsubscribe at any time and learn how we use your data in our Privacy Policy.