Capital Gains Tax Nil Rate Band: £3,000 Allowance, Rates, and Reporting

For the 2025-26 tax year, the tax-free slice often called the capital gains tax nil rate band is £3,000 for individuals. Its proper name is the Annual Exempt Amount, and it works as a yearly allowance: the first £3,000 of net gains you make from selling chargeable assets is free of Capital Gains Tax (CGT), and anything above it is taxed at 18% or 24% depending on your income.¹

A Note on the Name

“Nil rate band” is common shorthand, but strictly it belongs to Inheritance Tax, where it refers to the first £325,000 of an estate that passes free of IHT.² The CGT equivalent is the Annual Exempt Amount, set out in Section 1K of the Taxation of Chargeable Gains Act 1992.³ Getting the terminology right matters when you’re filling in forms or writing to HMRC.

How the £3,000 Allowance Works

The £3,000 figure is now permanently fixed going forward, a sharp fall from the £12,300 that applied as recently as 2022-23. The reduction came in two stages: £6,000 for 2023-24, then £3,000 from 2024-25.⁴

The allowance runs on a strict annual cycle. If you don’t use it in a given tax year, it’s gone. You can’t roll it into next year, and you can’t borrow next year’s allowance to cover a big gain this year.

Where you have gains taxed at different rates, Section 1K(5) of the 1992 Act lets you allocate the £3,000 against whichever gains save you the most tax, so you’d normally set it against gains taxed at 24% before those taxed at 18%.³

Every UK-resident individual has their own allowance. If you jointly own an asset with a spouse or partner, each of you can apply your full £3,000 against your share of the gain, so a jointly held disposal effectively carries a £6,000 tax-free slice.¹

What You Pay Above the Allowance

From 6 April 2025, individuals pay CGT at:

18% on gains that fall within any unused basic rate Income Tax band
24% on gains that exceed the basic rate band

These rates now cover all chargeable assets, including residential property. The higher property-specific rates that used to apply before April 2025 have gone, because the main rates were raised to match them.⁵

Working out which rate applies means stacking your taxable income and your taxable gains together. If your income already uses up your entire basic rate band, every pound of gain above £3,000 is taxed at 24%. If you have basic rate band left over, gains fill that space at 18% before the balance moves up to 24%.

Who Else Gets an Allowance

Personal representatives dealing with someone’s estate get the same £3,000 allowance, and can claim it for the tax year of death and the following two tax years, which gives them time to sell assets in an orderly way.³ They also pay a flat 24% on gains above the allowance.⁶

Trustees of settlements for disabled or vulnerable beneficiaries get the full £3,000. Most other trusts get half: £1,500. Where a settlor has created several trusts, the £1,500 may be divided between them, cutting each trust’s exempt amount to a few hundred pounds in some cases.¹

What Counts and What Doesn’t

Some assets sit outside CGT entirely, so gains on them never eat into your £3,000:

Your main home, where Private Residence Relief usually covers the full gain. If you only lived there for part of your ownership, the relief is reduced proportionally, though the final nine months always qualify.
Investments held inside an ISA or PEP.
UK government gilts and Premium Bonds.
Betting, lottery, and pools winnings.
Private cars (this doesn’t extend to vehicles held as trading stock).

⁷

Personal possessions sold for £6,000 or less are also exempt. Sell one for more than £6,000 and the gain becomes chargeable, though a marginal relief formula stops slightly crossing the threshold producing a disproportionate bill.⁸

Chargeable assets, the ones that can produce a taxable gain, typically include second homes and buy-to-lets, shares and funds held outside a wrapper, business assets, valuable personal items sold for more than £6,000, and cryptocurrency. To work out the gain, deduct the purchase price, allowable costs such as improvements, legal fees and stamp duty on purchase, and any reliefs from the sale proceeds. The net figure is what you compare with your £3,000 allowance.

Losses Change the Sum

Capital losses can bring a gain back below the exempt amount, or wipe it out altogether. Losses from disposals in the same tax year are set against your gains before the £3,000 is applied, even if that wastes part of the allowance. Losses carried forward from earlier years work differently: you only use them to the extent your gains exceed the exempt amount, so they never waste the £3,000.³

To preserve losses for future use, you have to report them to HMRC within four years of the end of the tax year they arose. Miss that window and they’re gone. It’s easy to overlook when no tax return would otherwise be due.

Reporting Gains Above the Allowance

With the allowance now at £3,000, more people cross it. What you have to file depends on what you sold.

UK Residential Property

If you sell UK residential property and there’s CGT to pay (because the gain isn’t fully covered by Private Residence Relief or other exemptions), you must report and pay within 60 days of completion, using HMRC’s Capital Gains Tax on UK property service.⁹ The clock runs from completion, not exchange. Missing the deadline brings late filing penalties and interest, and inherited properties are a common trap because the gain can come as a surprise.

Everything Else

Gains on shares, personal possessions, and other non-property assets go on the SA108 capital gains pages of your Self Assessment return. Whether you need to file at all depends on the current reporting threshold, which HMRC adjusted when it cut the exempt amount, so check HMRC’s guidance for the specific tax year before deciding you don’t need to report.¹⁰

Keep records even when no tax is due. Purchase price, improvement costs, dates, and sale proceeds for each asset. HMRC can open an enquiry into a return for up to 12 months after filing, and longer if they suspect tax has been lost. A spreadsheet beats a shoebox, and either beats trying to reconstruct the numbers years after the fact.

1
HM Revenue & Customs. Capital Gains Tax Rates and Allowances
2
GOV.UK. Inheritance Tax Thresholds and Interest Rates
3
Legislation.gov.uk. Taxation of Chargeable Gains Act 1992 – Annual Exempt Amount
4
HM Revenue & Customs. Capital Gains Tax – Annual Exempt Amount
5
GOV.UK. Capital Gains Tax – Rates
6
GOV.UK. Capital Gains Tax – Rates of Tax
7
GOV.UK. Capital Gains Tax – What You Pay It On
8
HM Revenue & Customs. Personal Possessions and Capital Gains Tax 2025 (HS293)
9
GOV.UK. Report and Pay Your Capital Gains Tax – If You Sold a Property in the UK on or After 6 April 2020
10
GOV.UK. Capital Gains Tax – Work Out if You Need to Pay