Capital Gains Tax doesn’t have to wipe out your profits (personal or business). If you make the right moves, you can avoid it and keep more money in your pocket (legally). In this article, I will cover Capital Gains Tax and how you can minimise or eliminate it to stretch your money further!.
This article is relevant as of the time of writing, if there are any changes that I am aware of, I will be updating it!
1. Start with Your Tax-Free Allowance
As a resident of the UK, you are legally entitled to get up to £6,000 tax free on gains for the year. Use it or lose it as your allowance does not roll on to the next year.
- How it works: Sell assets in chunks. For example, if you have £15,000 in gains from shares, sell £6,000 this tax year (ending April 5) and the rest in the new tax year. You’ll dodge tax on £12,000 total.
- Couples: Transfer assets to your spouse first. You’ll double the tax-free allowance to £12,000.
Real-world tip: If you’re selling property, check if you qualify for Private Residence Relief. If you lived in the home for even one year, the last 9 months of ownership are automatically tax-free.
2. ISAs Are Your Best Friend
Stocks & Shares ISAs aren’t just for saving, they’re a solid tax shield. This equally includes savings ISAs. You are also now able to open multiple ISAs so long as you don’t exceed the allowance limit (as a total sum).
- What to do: Move high-growth stocks into your ISA before they jump in value, or better yet, keep them there from the start!. You’ll pay no Capital Gains Tax when you sell them later.
- Catch: You can only add £20,000 yearly. Plan ahead.
Example: You bought £5,000 of shares outside an ISA. They’re now worth £10,000. Transfer them into your ISA (selling and rebuying counts toward your £20,000 limit). Future gains? Tax-free.
Avoid this: Trying to “Bed & ISA” the same shares within 30 days. HMRC calls this a “wash sale” and blocks the loss claim.
3. Losses Aren’t All Bad
Lost money on a bad investment? Use it to cut your tax bill by claiming deductions.
- How: Report the loss to HMRC (you have 4 years). It cancels out gains pound-for-pound. The time limit starts from the end of the tax year from the date the loss occurred.
- Extra benefit: If losses exceed gains, deduct £3,000 from your income tax.
Case study: Steve sold a rental flat for a £20,000 gain but lost £8,000 on crypto. His taxable gain drops to £12,000. After his £6,000 allowance, he pays Capital Gains Tax on just £6,000.
Key rule: Don’t re-buy the same asset within 30 days of selling at a loss. HMRC will ignore the loss.
4. Timing Matters More Than You Think
Hold assets for at least a year. Why?
- Short-term gains (under 1 year): Taxed as income—up to 45%.
- Long-term gains (over 1 year): Taxed at 10% (basic rate) or 20% (higher rate).
Property exception: Second homes get hit with 18% or 28% Capital Gains Tax. But if you’ve ever lived there, use Private Residence Relief.
Pro move: Sell after April 6 to defer tax by a full year which gives you a little bit more leeway.
5. Pensions Aren’t Just for Retirement
A SIPP (Self-Invested Personal Pension) lets you grow investments tax-free. They’re also available for your children if you want to give them a leg up!.
- How it works: Put £10,000 into a SIPP, and the government adds £2,500 (basic rate relief). Sell investments later? Zero Capital Gains Tax.
- Downside: Can’t touch the money until age 57 (from 2028).
Best for: Long-term investors with stocks or funds they won’t need soon.
6. Business Owners: Slash Your Rate to 10%
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) cuts Capital Gains Tax to 10% on business sales.
- Qualify: Own the business for 2+ years.
- Limit: £1 million lifetime allowance.
Example: Sell your café for £500,000 profit? Pay £50,000 tax instead of £100,000.
What to Do Next
- List your assets: Write down everything you might sell (property, shares, crypto).
- Prioritise: Sell assets with gains under £6,000 first.
- Talk to a pro: Use the Chartered Institute of Taxation’s directory for complex cases.
Missed this?
Gift assets to a basic-rate taxpayer spouse before selling. Their lower tax rate could save you thousands.
Still stuck? Ask your question below. I will do my best to answer it in plain English, no tax speak. Also feel free to check out my other article on Capital Gains Tax.
Remember: I am not a personal finance advisor so any personal tax advice should be sought by a professional
