In 2025, the UK will change its capital gains tax (CGT) system. These changes could impact homeowners, landlords, investors, and regular savers. The government has updated important thresholds and rates, so more people may have to pay taxes on asset sales they thought were tax-free before.
Why CGT 2025 Deserves Your Attention
These changes matter to anyone who owns investment property, sells shares, or deals with crypto assets. With lower allowances and more checks from HMRC, it’s crucial to understand how Capital Gains Tax (CGT) works and how to handle it. Whether you’re making a big financial decision or want to avoid surprise taxes, it’s important to stay updated on the 2025 changes.
What Is Capital Gains Tax and Who Pays It?
Capital gains tax is a levy on the profit (gain) you make when you sell or dispose of certain assets. These include:
- Investment properties (not your primary residence)
- Shares and bonds (outside ISAs or pensions)
- Business assets
- High-value items like art or jewellery
- Cryptocurrencies such as Bitcoin and Ethereum
You only pay Capital Gains Tax (CGT) on your profit, not the total sale price. For example, if you bought shares for £10,000 and sold them for £18,000, your profit is £8,000. You can subtract certain costs, like legal fees, property improvement costs, and brokerage fees.
UK residents must pay CGT when selling UK assets. Non-residents may also have to pay CGT under certain rules, especially for UK property. Knowing what causes a CGT charge is the first step in managing it.
Key Updates to UK Capital Gains Tax 2025
The 2025 tax year introduces stricter rules and smaller tax-free allowances, making tax planning important.
- CGT Allowance 2025: The maximum tax-free gain you can earn in a year is now £3,000. This is a decrease from £6,000 in 2023/24 and £12,300 in 2022.
- Capital Gains Tax Rates UK:
- 10% for basic-rate taxpayers (18% on residential property)
- 20% for higher/additional-rate taxpayers (24% on residential property)
The new UK Capital Gains Tax (CGT) rules aim to boost government revenue but are causing concern among investors, especially in the buy-to-let market. The lower threshold means more people will have to pay CGT, even on small profits from shares or modest properties.
Understanding UK CGT Thresholds 2025
Your Capital Gains Tax (CGT) depends on your income tax band. The UK CGT thresholds for 2025 follow these basic rules:
- If your total income and gains stay below the higher-rate income threshold (currently £50,270), you’ll pay the basic CGT rate.
- If your income pushes you into a higher band, the higher CGT rate applies.
Understanding your threshold is important for planning capital gains tax and deciding when to sell assets. Timing your sale can save you a lot of money. It’s also important to know that a large gain can push you into a higher tax bracket. You need to calculate your total income plus the gain to estimate your tax accurately.
For example, if you earn £45,000 and make a gain of £7,000, only £5,270 of that gain will be taxed at the basic rate. The rest will be taxed at a higher rate.
Capital Gains Tax on Property UK: The Big Hitters
Selling a second home or rental property? Be ready—capital gains tax on property in the UK is the highest. The rates are steep, and there are fewer relief options.
- Residential Property CGT Rates:
- 18% for basic-rate taxpayers
- 24% for higher-rate taxpayers (as of 2025)
You can only claim Private Residence Relief if the property is your main home. Letting Relief used to be helpful, but now it only applies if you lived in the property while renting it out.
If you co-own the property, sharing the sale profits can lower your tax burden. Remember, you have 60 days after the sale to report and pay your tax, so act fast.
Landlords need to rethink their investment strategy. With fewer exemptions and higher rates, it’s a good idea to consult a specialist like Clarkwell & Co. Capital Gains Tax Service London before selling. We offer personalised projections and advice to help you meet your investment goals.
How to Avoid CGT Legally: Smart Reliefs & Exemptions
There are multiple ways to legally reduce capital gains tax in the UK. These include:
- Gift to Spouse or Civil Partner: Transfers between spouses don’t incur capital gains tax (CGT). This means you can double your allowance and possibly lower your tax rate. You can also move shares or property ownership before selling to share the gain.
- ISA Investments: Gains from ISAs are tax-free. Always use these accounts for growing your capital. You can invest up to £20,000 each year.
- Pensions: Growth in a pension is free from CGT, and your contributions can lower your taxable income. Using a CGT strategy along with pension contributions gives you two tax benefits.
- Charity Gifts: Donating assets to UK charities avoids CGT and may provide income tax relief.
- EIS/SEIS Investments: Enterprise Investment Schemes and Seed EIS can defer or completely relieve CGT if you meet certain conditions.
Knowing how to avoid Capital Gains Tax (CGT) legally doesn’t mean dodging taxes. It means using the rules that HMRC allows smartly. Many of these strategies require planning, so it’s important to think ahead.
Practical Capital Gains Tax Planning Strategies
Let’s break down some everyday tactics that can save you money in 2025:
- Use Capital Losses: If you sell investments for less than you paid, you can use these losses to balance out any gains you made in the same year or carry them forward to future years. Make sure to report these losses to HMRC.
- Split Disposals Across Tax Years: Sell part of your asset before April 6 and the rest after to take advantage of two tax-free allowances. This is especially helpful for valuable share portfolios.
- Defer Sale Until Retirement: Wait to sell assets until your income is lower, which may lower your Capital Gains Tax (CGT) rate if you fall into the basic tax band.
- Bed and Spouse Strategy: Instead of selling and rebuying assets (which incur CGT), transfer them to your spouse. They can then sell and buy back, resetting the base price.
- Gifting to Children or Trusts: If done correctly, this can lower both estate and CGT liabilities.
At Clarkwell & Co., we help clients design personalised capital gains tax plans that match their goals. As tax allowances become stricter, even small changes in timing or ownership can lead to big savings.
What CGT Means for Everyday Investors in 2025
The changes affect your investments differently. Here’s a breakdown by sector:
- Stock Market Investors: A lower capital gains tax (CGT) allowance means you’ll pay tax on more of your profits. Consider moving gains into ISAs or holding onto them longer to benefit from lower taxes in future years.
- Crypto Investors: Crypto gains are also taxed under CGT. Many people forget to report these gains until HMRC notices. Use tracking tools to keep a detailed record of all your transactions.
- Business Owners: If you sell your business, you might qualify for Business Asset Disposal Relief (BADR), which taxes gains at only 10%. However, you must have owned at least 5% of shares for two years and be an employee or officer to qualify.
- Part-Time Landlords: Even if you rent out a flat part-time, you may owe CGT on any profits when you sell it.
Every day, savers and retirees are being pulled into the CGT system, making awareness and advice more important than ever. Single sales or life events can unexpectedly create tax responsibilities.
Common Pitfalls and HMRC Red Flags
Avoiding unexpected tax bills means steering clear of these CGT traps:
- Not Reporting in Time: You must report property sales and pay Capital Gains Tax (CGT) within 60 days of the sale. Missing this deadline can lead to fines and interest charges.
- Incorrect Valuations: If you inherited or received the asset as a gift, use its market value when you got it. HMRC may question your numbers if they seem too low.
- Neglecting Record-Keeping: HMRC wants you to keep track of costs, sale proceeds, and related expenses. Poor record-keeping can cause problems. Save receipts, legal papers, and records of any improvements.
- Ignoring Tax on Crypto or NFTs: New assets like cryptocurrencies and digital collectables are taxable. HMRC is now getting information from major exchanges about these transactions.
HMRC is increasing its digital tools to find mistakes. With the UK capital gains tax tightening in 2025, it’s best not to take risks. A bit of organisation now can prevent big problems later.
When to Seek Professional Help
The new rules are complicated, and one mistake can be expensive. That’s why it’s wise to talk to a tax expert. Trying to handle it alone might save you money at first, but it could result in costly mistakes later.
At Clarkwell & Co., we offer dedicated guidance on:
- Complex asset disposals
- Inheritance and CGT interactions
- Cross-border CGT rules
- Business sale planning
- HMRC compliance and dispute resolution
If you’re an investor, landlord, or unsure about your taxes, we can help you make smart choices and keep more of your money. Schedule a consultation today to take charge of your financial future.
