The £3,000 CGT Allowance 2026/27: What It Is and How to Use It

What Is the Annual Exempt Amount?

The annual exempt amount (AEA), also called the CGT allowance, annual CGT allowance or personal CGT exemption, is the amount of capital gains an individual can make in a tax year without paying any capital gains tax. For 2026/27, the AEA is £3,000. Net capital gains below this threshold in a tax year are completely free from CGT. The AEA applies after capital losses have been deducted from gains.

The AEA applies to each individual separately. A married couple or civil partnership has a combined AEA of £6,000 if both spouses make disposals (two lots of £3,000). Trusts typically receive a lower AEA of £1,500 for 2026/27, except for certain trusts for disabled persons which receive the full £3,000.

The AEA is use-it-or-lose-it within a tax year. Any unused AEA at 5 April is permanently lost, it cannot be carried forward to the next year or transferred to a spouse. This makes annual CGT planning important for anyone with investments or properties that have grown in value.

The History of the AEA Cuts

The dramatic reduction in the AEA is one of the most significant CGT changes in decades. The AEA stood at £12,300 for 2022/23 and had been at broadly that level (rising with inflation) for many years. In the Autumn Statement of November 2022, the government announced it would be cut to £6,000 for 2023/24 and £3,000 from 2024/25 onwards, a 76% reduction in just two years.

This means that millions of investors, landlords and business owners who previously owed no CGT (because their annual gains were within the allowance) now face CGT bills for the first time. An investor with £10,000 of gains annually would have paid no CGT in 2022/23, but now pays CGT on £7,000 of that gain, £1,260 at 18% or £1,680 at 24%.

The stated rationale was to increase tax revenue and reduce the incentive for income to be structured as capital gains (which historically were taxed more lightly than income). The practical effect is that more people are now caught by CGT for the first time, and existing CGT payers face substantially higher bills.

How the AEA Interacts with Losses

Current-year losses must be deducted from current-year gains before the AEA is applied. You cannot choose to carry forward a current-year loss to preserve the AEA, losses are applied compulsorily in the year they arise. If you have gains of £8,000 and losses of £4,000 in the same year, the net gain is £4,000, and the £3,000 AEA reduces the taxable gain to £1,000.

Brought-forward losses from earlier years are applied differently. They are only applied to the extent necessary to bring the net gain down to the AEA. So if you have £10,000 of gains and £20,000 of brought-forward losses, you only apply £7,000 of the losses (to reduce the gain to £3,000, which is sheltered by the AEA). The remaining £13,000 of losses is preserved and carried forward again. This rule is important: it prevents brought-forward losses from being wasted against gains that would have been exempt anyway.

Strategies to Make the Most of the £3,000 AEA

Annual crystallisation, review your portfolio before 5 April each year and consider realising gains up to £3,000. Even if you intend to keep holding the investment, you can sell and immediately repurchase inside an ISA (bed-and-ISA), which upgrades the holding to tax-free status without triggering the 30-day same-account rule. Over many years, this systematic migration of GIA holdings into the ISA wrapper is highly valuable.

Spousal use, if one spouse has not used their AEA and the other has already used theirs, transferring an asset with a gain to the unused-AEA spouse and having them sell it allows both AEAs to be used in the same year. Transfers between spouses are no-gain/no-loss, so no CGT arises on the transfer itself. Over a lifetime, this can shelter an additional £3,000 of gains per year per couple.

Timing disposals around the year-end, if you are planning to sell assets with total gains of, say, £8,000, selling half before 5 April and half after 6 April uses two years' worth of AEA (£6,000) instead of one. This simple timing adjustment saves £900 for a basic-rate taxpayer (£3,000 × 18% × 2 transactions) or £1,440 for a higher-rate taxpayer.

The AEA and ISAs

Assets inside a Stocks and Shares ISA are completely exempt from CGT, there is no annual limit on the gains they can make. This makes ISAs the most powerful long-term tool for eliminating CGT entirely. The annual ISA subscription limit is £20,000 for 2026/27. The key strategy is to prioritise holding your highest-growth assets inside an ISA, where future gains will never be taxed.

The bed-and-ISA technique (selling in a general account, using the AEA to shelter the gain, and immediately repurchasing inside the ISA) progressively transfers holdings from a taxable environment to a tax-free one. The repurchase can happen on the same day because the ISA holding is legally distinct, the 30-day anti-avoidance rule does not apply to purchases inside an ISA. HMRC confirms this in the Capital Gains manual at CG42562.