Capital Taxes

Capital Gains Tax

Capital Gains Tax rates

The Capital Gains Tax (CGT) rates remain unchanged for 2027/28.

Capital Gains Tax Annual Exemption

The annual exempt amount for individuals will remain at £3,000 for 2027/28.

Business Asset Disposal Relief

The rate applying for individuals claiming Business Asset Disposal Relief (BADR) and Investors’ Relief will remain at 18% for disposals made in 2027/28.

For qualifying disposals made on or after 6 April 2027, the lifetime limit will be reduced from £1 million to £500,000. There will be special provisions applied to contracts entered into before 6 April 2027 but not completed, as well as certain share reorganisations and exchanges that have not completed by 6 April 2027.

Gift Holdover Relief

As announced at Budget 2025, the formula to restrict gift holdover relief on the disposal of qualifying shares or securities will be amended to include assets within the intangible fixed asset regime as well as assets that qualify for the substantial shareholding exemption. This change will have effect from 6 April 2027.

Founders’ Relief

The government is launching a consultation for a new CGT relief for founders of and significant early investors in high-growth, innovative UK companies. Founders’ Relief will take effect for qualifying disposals made on or after 6 April 2027.

The relief will apply a 10% CGT rate to qualifying disposals of shares. There will be a lifetime limit of £10 million of gains per individual.

The consultation seeks views on how the proposed individual, company and growth and innovation conditions will work in practice.

Late filing penalties for UK property disposal returns

Changes will be made to the late filing penalties regime to ensure that where penalties arise on the late submission of a UK property disposal return, these will cease to accrue if the person later reports the disposal on their Self Assessment tax return.

Inheritance Tax

Inheritance Tax nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and will continue to be frozen until 5 April 2031. An additional nil rate band, called the ‘residence nil rate band’ is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2 million.

Unused pension funds and death benefits

The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027.

All death in service benefits payable from registered pension schemes will generally be excluded from the value of an individual’s estate for IHT purposes.

The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request that the pension scheme administrator pays their IHT liability directly to HMRC in specific circumstances. Personal representatives may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months.

Agricultural Property Relief and Business Property Relief

For 2027/28, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £2.5 million. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief.

The £2.5 million limit applies per person and is refreshed every seven years. This allowance is transferable between married couples or civil partners.

There may be a further £2.5 million allowance for trusts in certain situations but the rules are complex.

The £2.5 million limits for both individuals and trusts will be frozen until 5 April 2031.