The capital gains tax annual exempt amount — often called the annual allowance, though strictly it is not an allowance in the income tax sense — is the amount of gains each individual can make in a tax year completely free of CGT. For 2026/27 it is £3,000.
That may sound small, and compared to the £12,300 it was in 2022/23, it is significantly reduced. But it is still a real, use-it-or-lose-it figure. If you do not use it in the year it arises, it disappears — there is no carrying forward unused exemptions to future years!
How the annual exempt amount works
Every UK resident individual has a £3,000 annual exempt amount for 2026/27. The first £3,000 of net chargeable gains each year is tax-free. Gains above that are taxed at 18% or 24% on residential property depending on your income.
The exempt amount is applied after capital losses (including carry-forward losses from earlier years, though those are only used to the extent needed to reduce gains above £3,000). It is not transferable between individuals — each person has their own.
Strategy 1: joint ownership to double the exemption
If a property is jointly owned by a married couple or civil partners, each owner has their own £3,000 exempt amount. A jointly owned property with a total gain of £6,000 could be entirely tax-free. This is one of the arguments for putting second homes and rental properties in both names from the outset.
If a property is currently in one person's name and has a modest gain, transferring a share to a spouse before sale (a no-gain, no-loss transfer between spouses) can double the available exemption. This requires the transfer to happen before exchange of contracts, and there must be genuine joint ownership — not just a paper arrangement.
Strategy 2: timing disposals across tax years
If you are planning to sell multiple properties, consider whether spreading completions across two tax years allows you to use each year's exemption. Exchanging one property in March and another in April means the gains fall into different tax years, each with their own £3,000 exemption.
This can require careful coordination with solicitors on exchange timing, and the CGT saving must be weighed against any commercial reasons to move faster. But for planned disposals, the difference can be worth engineering.
Strategy 3: not leaving the exemption unused
If you are selling a property with a large gain and your total gain will far exceed £3,000 regardless, the exempt amount is not wasted — it saves you tax on the first £3,000 of gain. At 24%, that is £720 of tax saved. The exemption always does its job.
Where people genuinely lose the exemption is when they have no gains in a year and do not realise there is no carry-forward. If you are approaching 5 April with unused exemption and you have investment assets sitting on gains, selling some of those assets (and potentially repurchasing them) can use the exemption productively. This is sometimes called "bed and ISA" when the proceeds are reinvested into an ISA.
Strategy 4: using losses carefully alongside the exemption
Current-year losses must be set against current-year gains before the exempt amount is applied. If you make a £3,000 gain and a £1,000 loss in the same year, the net gain is £2,000 — below the exempt amount, and no tax is due. The loss is effectively wasted (it has done its job, but so would the exempt amount have).
This matters when deciding whether to crystallise investment losses in the same year as a property gain. If the property gain alone already exceeds £3,000, the losses genuinely reduce the taxable gain. If the property gain is below £3,000 and would be covered by the exempt amount anyway, crystallising losses in the same year does not help.
What the reduced exempt amount means in practice
Before 2023, many people with modest property gains — selling a small rental property with a gain of £12,000 or less, jointly owned, with the gain split between two people — faced no CGT bill at all. Under current rules, only the first £6,000 (£3,000 per person) of a joint disposal is tax-free.
This has brought more property sellers into the CGT net than before. If you sell a buy-to-let or second home in 2026/27 and your net gain exceeds £3,000 (individually) or £6,000 (jointly), a CGT return is required and tax is due within 60 days.
Getting the filing right
The 60-day CGT return must be filed even when the taxable gain after the exempt amount is modest. There is no threshold below which the return is not required — if a gain exists on a residential property disposal, the return is mandatory.
If you want to understand how the annual exempt amount interacts with your specific gain, spousal ownership split, or other disposals in the year, a Chartered Accountant/Chartered Tax Advisor can make sure you are using it to best effect.