The annual exempt amount is the slice of net chargeable gains that is free of Capital Gains Tax each tax year. For 2026 to 2027 it is £3,000 for an individual and £1,500 for most trusts. It is deducted after losses of the same year but before losses brought forward, and having gains covered by it does not always mean you can skip reporting them.

How much is the exemption for 2026 to 2027?

Section 1K of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) sets the annual exempt amount for an individual at £3,000. That figure was introduced by Finance Act 2023 with effect for 2024 to 2025 onwards, and it remains £3,000 for 2026 to 2027. GOV.UK calls it the Capital Gains tax free allowance.

Who Annual exempt amount 2026 to 2027 Where the rule sits
Individual £3,000 TCGA 1992 s1K(2)
Personal representatives, year of death and next two tax years £3,000 TCGA 1992 s1K(7)
Trustees of a settlement for a disabled person £3,000 TCGA 1992 Sch 1C para 2
Trustees of other settlements £1,500 TCGA 1992 Sch 1C para 5

Gains above the exemption are taxed for 2026 to 2027 at 18% where they fall within the basic rate band and 24% above it, and trustees and personal representatives pay 24%. The rates themselves are covered in Capital Gains Tax rates.

In what order is the exemption deducted?

The order is set by section 1K(4) and it decides how much relief you actually get:

  1. Work out the gain or loss on each disposal in the tax year, after allowable costs and any reliefs.
  2. Deduct allowable losses of the same tax year from those gains. This is compulsory, even if it pulls the net gain below £3,000 and part of the exemption is wasted.
  3. Deduct the annual exempt amount.
  4. Only then deduct losses brought forward from earlier years, and only as far as needed to bring the gain down to the exempt amount. Any balance carries forward again.

Section 1K(5) lets you set the exemption against gains in whatever way is most beneficial, so it should be used against gains that would otherwise be taxed at 24% before those taxed at 18%. GOV.UK gives the same instruction. Any part of the exemption not needed in a year is not carried forward, because section 1K only deducts it so far as necessary to eliminate that year’s gains.

Illustration only. Sam has £10,000 of losses brought forward and, in 2026 to 2027, makes gains of £9,000. Net gains after the £3,000 exemption are £6,000, so Sam uses £6,000 of the brought forward losses and carries £4,000 forward. Priya makes a gain of £3,000 and, in the same tax year, sells other shares at a £2,000 loss. Her net gain is £1,000, covered by the exemption, but the £2,000 loss has gone and £2,000 of the exemption is wasted. Had she sold the loss making shares on or after 6 April 2027, the £3,000 gain would still have been fully covered and the £2,000 loss would have been available for a later year.

Who is entitled to the exemption?

Each individual has their own annual exempt amount, so spouses and civil partners have one each. Transfers between spouses or civil partners living together are generally free of Capital Gains Tax, according to GOV.UK, which is why couples often consider where assets sit before a sale so that both exemptions can be used.

Personal representatives of someone who has died receive the individual amount for the tax year of death and the next two tax years under section 1K(7). Estates that take longer to administer lose the exemption from the fourth year.

From 2025 to 2026 an individual who makes a foreign gain claim, a foreign income claim or a foreign employment election for the year loses the annual exempt amount for that year (section 1K(6)). This is a real cost to weigh before claiming relief on foreign income or gains.

How does the exemption work for trusts?

Schedule 1C to TCGA 1992 applies section 1K to trustees. The basic rule is that trustees get half the individual amount, which is £1,500 for 2026 to 2027. Trustees of a settlement for the benefit of a disabled person get the full £3,000. To qualify, the trust must secure that, during the disabled person’s lifetime, any property applied for a beneficiary is applied for them and any income is either theirs or applied for their benefit (paragraph 3). A small power to benefit others, up to the lower of £3,000 or 3% of the trust fund, does not break this.

Where one settlor has made two or more qualifying UK settlements, the exemption is shared out under paragraph 6. Each trust gets half the individual amount divided by the number of settlements in the group (the full amount divided, for disabled person trusts), but never less than one tenth of the individual amount, which is £300 for 2026 to 2027. Settlements made before 6 June 1978 (10 March 1981 for disabled person trusts), charitable trusts, pension trusts and trusts with no UK resident trustees in the year are left out of the count (paragraph 7).

Illustration only. A settlor has created three discretionary trusts. Each has £1,500 divided by three, which is £500. If the same settlor had created six, each would have £300, because £1,500 divided by six is less than the £300 floor.

When must gains be reported even if no tax is due?

There is no bill unless you report. GOV.UK says you must report and pay if your taxable gains are above the allowance. If you are registered for Self Assessment, you must also report on your return where the total proceeds from disposals in the year exceeded £50,000, for 2023 to 2024 onwards, even if the gains are covered by the exemption. Trustees face equivalent tests on the Trust and Estate Tax Return: proceeds over £50,000, or gains before losses above the annual exempt amount.

UK residential property sales with tax to pay follow a separate route: since 27 October 2021 the report and payment are due within 60 days of completion, as explained in the 60 day property return. A non resident must tell HMRC about every disposal of UK property, residential or not, even if there is no gain. Other gains go on the Self Assessment return, or eligible people can use the real time Capital Gains Tax service by 31 December after the end of the tax year.

How do capital losses interact with the exemption?

Losses must be claimed to be usable. GOV.UK says you can claim up to four years after the end of the tax year of disposal, by including the loss on your return or, if you are not in Self Assessment, by writing to HMRC. A loss on a disposal to a connected person, such as a close relative or a company you control, can only be set against gains on disposals to the same person; see connected persons. Shares that have become almost worthless can produce a loss without a sale through a negligible value claim.

The practical point is the asymmetry in section 1K(4). Brought forward losses are protected, because they are only used down to £3,000. Losses of the current year are not protected, and can wipe out gains that the exemption would have covered anyway.

What mistakes come up most often?

  • Assuming that gains under £3,000 never need reporting, when proceeds over £50,000 still trigger a report for anyone in Self Assessment.
  • Applying the exemption before same year losses, which overstates the losses carried forward.
  • Giving each of several family trusts £1,500 without checking whether one settlor created them all.
  • Personal representatives claiming the exemption in the fourth tax year after death.
  • Forgetting that a claim on foreign income or gains costs the exemption for that year.
  • Not keeping records: GOV.UK says records must be kept for at least a year after the Self Assessment deadline, and longer if HMRC has opened a check.

Current thresholds for other taxes are summarised in UK tax rates and thresholds 2026 to 2027.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.