How to Use the £3,000 Annual Exempt Amount in 2026/27

What Is the Annual Exempt Amount?

The annual exempt amount (AEA) is the amount of net capital gains each individual can make in a tax year without paying any CGT. For 2026/27 it is £3,000. Net gains above £3,000 are subject to CGT at 18% or 24% depending on the taxpayer's income. The AEA has been significantly reduced in recent years: it was £12,300 for 2022/23, then cut to £6,000 for 2023/24 and further to £3,000 for 2024/25 onwards.

The AEA applies to each individual separately. A married couple each have their own £3,000 AEA, giving a combined £6,000 of tax-free gains per year if both spouses make disposals. The AEA cannot be transferred between spouses, each person must use their own.

Use It or Lose It

The AEA cannot be carried forward. Any unused AEA at 5 April is permanently lost. This means there is a real benefit in timing disposals to use the AEA each year rather than making all disposals in one year and wasting multiple years' worth of allowances. An investor planning to sell a large shareholding might split the sale across two tax years: sell some in March (before 5 April) and the remainder in April (after 5 April), using two years' worth of AEA.

Similarly, investors who have not made any gains in a tax year might consider whether to realise some growth before 5 April to use the AEA. This is known as bed and re-ISA, where you sell shares, use the AEA to reduce any gain, and then repurchase inside an ISA. This shelters future growth from CGT entirely. The repurchase inside the ISA can happen immediately, the 30-day rule that applies to direct repurchase in the same account does not apply to repurchases inside an ISA.

Transferring Assets Between Spouses

Gifts between spouses and civil partners are made at no-gain/no-loss for CGT purposes. This means you can transfer an asset to your spouse without triggering a CGT event. The receiving spouse acquires the asset at your original cost. When they eventually sell the asset, they use their own AEA and pay CGT at their own marginal rate.

This strategy is most valuable when one spouse has a lower income and therefore pays CGT at 18% rather than 24%, and when one spouse has an unused AEA. If your spouse has made no gains this year and you are about to sell an asset with a £10,000 gain, transferring the asset to your spouse first means the £3,000 AEA shelters part of the gain and the remaining £7,000 may be taxed at 18% rather than 24%, a saving of £420 on that portion alone.

Losses and the Annual Exempt Amount

Capital losses from the same tax year must be set against capital gains before the AEA is applied. This means if you have both gains and losses in a year, the losses reduce your gain first, and then the AEA applies to the net result. You cannot choose to carry forward current-year losses to preserve the AEA, they must be applied in the year they arise.

Losses brought forward from previous years behave differently. They are only applied to the extent needed to reduce the net gain to the AEA. So if you have £10,000 of gains, £3,000 of AEA and £8,000 of brought-forward losses, you would only apply £7,000 of the losses (to bring the gain down to £3,000, which is sheltered by the AEA). The remaining £1,000 of losses is carried forward to future years.