Annual Exempt Amount Guide 2026/27
The Capital Gains Tax allowance, officially known as the Annual Exempt Amount (AEA), is a tax-free allowance that every individual has for capital gains. Understanding how it works and how to make the most of it is essential for effective tax planning.
This guide explains the current allowance for the 2026/27 tax year, how to use it, and strategies to maximise it. For more expert tax guidance, visit our homepage.
What is the Annual Exempt Amount?
The Annual Exempt Amount is the amount of capital gain you can make in a tax year before you have to pay any Capital Gains Tax.
For the 2026/27 tax year:
- The AEA is £3,000.
- You only pay CGT on gains above this amount.
- If your total gains are below £3,000, you have no CGT to pay.
- You cannot carry forward unused AEA to future years.
Important: The AEA has been significantly reduced from £12,300 in 2022/23. This means more people are now liable to CGT, and it’s essential to plan your disposals carefully.
For trustees, the AEA is £1,500 for 2026/27.
Why Was the Allowance Reduced?
The government reduced the AEA to simplify the tax system and raise revenue. The reduction means that more individuals are now required to report and pay CGT.
How to Use Your Annual Exempt Amount
The AEA is applied to your total gains for the tax year. It is not per asset; it is a single allowance for all your gains.
Example
You sell shares with a gain of £2,000. You sell a second property with a gain of £5,000. Total gains: £7,000. AEA: £3,000. Taxable gain: £4,000. CGT is calculated on £4,000.
Strategies to Maximise Your Allowance
1. Spread Disposals Across Tax Years
If you have assets to sell, consider spreading the disposals across two tax years to use two Annual Exempt Amounts.
Example: Instead of selling £20,000 of shares in March, sell £10,000 in March and £10,000 in April. This uses two AEAs (£6,000 in total).
2. Use Your Spouse’s Allowance
If you are married or in a civil partnership, you can transfer assets to your spouse to use their AEA.
- No CGT on Transfers: Transfers between spouses are treated as ‘no gain, no loss’ for CGT purposes.
- Double the Allowance: Each spouse has their own £3,000 AEA, giving a combined allowance of £6,000.
3. Use ISAs and Pensions
Gains within an ISA or a pension are completely exempt from CGT. If you have investments outside these wrappers, consider moving them into an ISA (within your annual ISA allowance of £20,000). For more on ISAs, see our Investors and capital gains page.
For 2026/27, the annual ISA subscription limit remains at £20,000. However, investors should be aware that this position changes from 6 April 2027, when the annual Cash ISA limit for those under 65 is reduced to £12,000 within the overall £20,000 limit.
4. Bed & ISA
This involves selling shares and immediately buying them back within an ISA. This triggers a CGT liability on the sale, but future gains are tax-free. The 30-day ‘bed and breakfast’ rule does not apply to Bed & ISA transactions.
5. Offset Losses
If you have capital losses, you can use them to reduce your gains. Losses must be reported to HMRC within 4 years.
6. Consider the Timing of Disposals
If you are nearing the end of the tax year and have unused AEA, consider if it makes sense to dispose of assets to use it.
What Happens if You Don’t Use Your Allowance?
The AEA is ‘use it or lose it’. If you don’t use it in a tax year, you cannot carry it forward. This makes it important to plan your disposals strategically.
Record Keeping for CGT
To calculate your gains and use your AEA correctly, you need to keep good records:
- Purchase documents: Contracts, receipts, and valuations.
- Sale documents: Contracts and receipts for selling costs.
- Improvement records: Receipts for any capital improvements.
- Broker statements: For share and investment transactions.
- Crypto records: Transaction histories for cryptoassets.
You must keep these records for at least 5 years after the 31 January filing deadline for the relevant tax year.
How We Can Help
Our ACCA-qualified accountants can:
- Advise on how to maximise your Annual Exempt Amount.
- Help you plan disposals across tax years.
- Calculate your CGT liability accurately.
- Prepare and file your tax return.
Let us help you make the most of your Capital Gains allowance.
📚 Related Guides
• Capital Gains Tax Guide
• Property Capital Gains Tax
• Capital Gains Tax for Landlords
• Investors and Capital Gains
• Joint Property Ownership Tax
• Capital Gains Tax Calculator
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