Annual Exempt Amount
The amount of capital gains you can make in a tax year before Capital Gains Tax becomes due, currently £3,000 for individuals. Gains below this threshold are completely free of CGT, but the allowance cannot be carried forward to future years. Couples can each use their own Annual Exempt Amount, effectively doubling the tax-free gains on jointly held assets.
How it works
The Annual Exempt Amount applies once per person per tax year across all your capital gains combined, not per asset — so if you sell several assets in the same year, the gains are added together and only the total above £3,000 is taxable. It is a use-it-or-lose-it allowance: any unused portion at the end of the tax year simply disappears and cannot be carried into the next year.
Transfers of assets between spouses and civil partners are exempt from Capital Gains Tax, which means couples can move an asset into joint names before selling it, allowing both partners' Annual Exempt Amounts to be set against the same overall gain. This is one of the simplest and most widely used pieces of CGT planning available to married couples and civil partners.
You only need to report gains on your Self Assessment return, or via the 60-day residential property return, once they exceed the Annual Exempt Amount, subject to separate rules on reporting total proceeds. Keeping records of purchase and sale costs for every asset is essential, because the exempt amount is applied after allowable costs have already reduced the gain.
Example: using the Annual Exempt Amount
You sell shares for a gain of £5,000 in the tax year, with no other disposals and no losses to offset.
The first £3,000 of that gain is covered by the Annual Exempt Amount, leaving £2,000 as your taxable gain, which is then taxed at the rate that applies to your income level and the type of asset.
Frequently asked questions
Can I carry forward an unused Annual Exempt Amount?
No. It resets every tax year and any part you do not use against gains made in that year is lost — it cannot be rolled into a future year.
Can a married couple use two Annual Exempt Amounts on the same asset?
Yes, because transfers between spouses and civil partners are CGT-free, an asset can be moved into joint names before sale so both people's allowances apply to the gain.
Do capital losses affect the Annual Exempt Amount?
Yes. Losses are deducted from your gains before the Annual Exempt Amount is applied, so you only use the allowance against your net gain for the year.
Related Terms
Capital Gains Tax
A tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets.
Business Asset Disposal Relief (BADR)
A Capital Gains Tax relief on qualifying business disposals — charged at a flat rate of 10% for 2024/25, 14% for 2025/26, and 18% from April 2026 — up to a £1 million lifetime limit per individual.
Investors' Relief
A Capital Gains Tax relief that applies a reduced flat rate on gains from disposing of shares in unlisted trading companies, aimed at encouraging external investors in small businesses.
Residential Property CGT
Capital Gains Tax on gains from selling UK residential property that is not your main home, charged at 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers.
Try the calculator
Use our free tool to see how annual exempt amount affects your tax.