CGT Annual Allowance Explained: How the £3,000 Exemption Works

Every UK resident gets a Capital Gains Tax annual exempt amount — in 2026/27 this is £3,000. You can make gains up to this amount each tax year without paying any CGT.

What it covers

The allowance applies to gains from: shares and funds, second properties, crypto assets, business assets, and most other chargeable assets. It does not apply to gains made inside an ISA or SIPP — those are always tax-free.

Use it or lose it

The annual allowance cannot be carried forward. If you don't use it in a given tax year, it's gone. Consider crystallising gains each year up to the £3,000 limit — especially if you have a portfolio of shares.

Bed and ISA

A popular strategy: sell shares to trigger a gain within the annual allowance, then buy them back inside a Stocks & Shares ISA. Future growth is then fully sheltered from CGT.

The mechanic works because the repurchase happens inside a tax wrapper. Selling and rebuying in the same general account within 30 days would fall foul of the bed and breakfasting rule, which matches your disposal against the reacquisition and cancels the gain you were trying to crystallise. Moving the holding into an ISA sidesteps that entirely, and the same logic applies to a bed and SIPP or a transfer to a spouse.

The 30-day rule, and why it exists

If you sell shares and buy back the same shares in the same capacity within 30 days, HMRC matches the sale to that repurchase rather than to your original holding. The effect is that the gain you intended to realise largely disappears, and so does the use you were trying to make of your exempt amount.

Disposals are matched in a fixed order: first against shares acquired on the same day, then against those acquired in the following 30 days, and only then against the pooled holding at its average cost. Understanding that order is what makes the difference between a plan that works and one that quietly fails.

Worked example: using the allowance deliberately

You hold shares bought for £12,000 now worth £20,000, giving an unrealised gain of £8,000.

• Sell a portion representing a £3,000 gain. That means disposing of roughly £7,500 worth, since the gain is only part of the proceeds.
• The £3,000 gain is covered by the annual exempt amount, so no CGT is due and nothing needs reporting if you are under the reporting threshold.
• Repurchase the same shares inside an ISA. Your base cost on the repurchased holding resets to the higher price.
• Repeat in the next tax year with the remaining unrealised gain.

Over several years this converts a large latent gain into a series of exempt ones, and shelters the holding permanently. The constraint is your annual ISA subscription limit, which caps how much you can move each year.

Married couples and civil partners

Transfers between spouses and civil partners living together are made on a no gain, no loss basis, meaning no CGT arises on the transfer itself. The receiving partner inherits the original base cost.

That gives a couple two annual exempt amounts rather than one, and allows a gain to be realised by whichever partner has the lower income and therefore more unused basic rate band. On a substantial disposal the saving can be considerable, but the transfer must be genuine and must happen before the sale.

When you still need to report

Being under the exempt amount does not always mean there is nothing to do. You generally still need to report if your total proceeds exceed the reporting threshold, if you are already required to file a Self Assessment return, or if you are claiming a loss you want to carry forward.

Reporting losses matters more than people realise. Losses must be claimed within four years of the end of the tax year in which they arose, and an unclaimed loss cannot be resurrected later to offset a future gain.

What the allowance does not cover

Gains inside an ISA or pension are outside CGT altogether, so the exempt amount is irrelevant there and using it on sheltered assets achieves nothing. Your main home is normally covered by Private Residence Relief instead. And the allowance applies per person, not per asset or per account, so it is shared across everything you dispose of in the year.

Run your own numbers

Use the CGT calculator to see how much of your allowance a given disposal would use, or the shares calculator for pooled holdings where the average cost basis applies.

General information, not tax advice. Allowances and rules change between tax years, and the interaction with reliefs can be complex. HMRC guidance is definitive, and professional advice is worth taking on larger sums.