Caught Off Guard: Capital Gains Cuts Are Quietly Hitting the Middle Class

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The UK’s tax landscape is shifting and not through headline-grabbing rate hikes, but through a series of quiet cuts, dragging ordinary people into paying more tax.

Nowhere is this more evident than in capital Gains Tax (CGT), where a shrinking allowance once seen as generous is now so tight it’s catching middle-class investors, landlords and retirees off guard.

Capital Gains Tax (CGT) allowance slashed by 76% since 2022, from £12,300 to just £3,000 by 2024/25.
£690 per household is the estimated CGT burden per UK household in 2025/26 (based on £19.7 billion total CGT receipts forecast by the OBR)
235,000 more taxpayers expected to report CGT, many for the first time via self-assessment
CGT revenue is set to double, rising from £15 billion a year today to an estimated £31 billion by 2029–30, with much of the increase driven by the lower allowance and higher rates
Bad news for business owners: Business Assets Disposal Relief (BADR) rate climbs from 10% to 14% for asset disposals after 6 April 2025

Thousands of UK taxpayers are being hit with unexpected tax bills this year as the impact of last April’s Capital Gains Tax (CGT) allowance cut begins to bite. With the annual threshold being reduced to £3,000, individuals making relatively modest gains, such as when selling a second home, shares or even gifting assets, are being pulled into a CGT liability.

This sharp reduction is dragging many middle-income individuals, retirees and investors into paying the tax for the first time, often requiring them to file self-assessment tax returns for modest gains that previously went untaxed. Chartered Accountancy firm, Ridgefield Consulting, is urging individuals to review their tax exposure, especially if they are selling property, shares, gifting or selling assets.

Simon Thomas, Managing Director at Ridgefield Consulting, said:

“This is a change that has flown under the radar, but it’s quietly affecting a huge number of people in 2025. It’s not grabbing headlines, but CGT cuts are blindsiding ordinary taxpayers, many of whom have never filed a return before.”

What Changed for Capital Gains Tax?

April 2023 saw the annual CGT exemption cut from £12,300 to £6,000
In April 2024, it fell again to just £3,000 where it remains for 2025/26
April 2025: Business Asset Disposal Relief (BADR) rate increased from 10% to 14%, impacting business owners and entrepreneurs selling shares or business assets

What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax paid on the profit when you sell or ‘dispose’ of an asset that’s increased in value. It applies to assets such as:

Property that’s not your main home
Shares and investments (outside of ISAs)
Business assets
Personal items worth over £6,000 (e.g. antiques, art)

The tax is applied only to the gain and not the total sale amount, but with the annual exemption slashed to just £3,000, even modest gains now face tax.

What Can You Do to Prepare?

what-can-you-do-to-prepare-when-capital-gains-cuts-hit-middle-class Ridgefield Consulting recommends that individuals and small business owners take proactive steps to minimise their CGT exposure:

Time disposals: the annual CGT exemption you cannot carry forward from previous years, so it is advised to spread asset disposal strategically across tax years or split them on either side of a financial year if needed to make the disposal on a shorter term.
Offset gains with losses: Disposing of underperforming assets at a loss can effectively reduce your CGT bill, as these losses can be carried forward to offset gains.
Use spousal exemptions to double up on allowances: Married couples or civil partners can transfer assets tax-free between each other, and if one person has fully utilised their CGT exemption, they can transfer the asset to the other partner to take advantage of their exemption. This allows for a combined gain of up to £6,000.
Transfer assets into ISAs or pensions: Consider moving assets into ISAs or pensions. Investments held within ISAs are exempt from both income and capital gains tax, offering a highly effective long-term strategy. Higher-rate taxpayers may also reduce their CGT exposure by making pension contributions, which in turn increases the portion of their income taxed at the basic rate, allowing more of their gains to be taxed at the lower 18% CGT rate.

Thomas further comments:

“With allowances falling and more taxpayers affected, the margin for error is shrinking. Now’s the time to plan smarter, not later, when the tax bill lands.”

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