Capital Gains Tax for UK Directors in 2026/27: Rates, Planning and What Changed

Capital Gains Tax Rates for UK Directors in 2026/27

Capital gains tax for UK directors in 2026/27 is charged at two main rates: 18% on gains that fall within the unused portion of your basic-rate income tax band, and 24% on gains above that threshold. These rates took effect from 30 October 2024 following the Autumn Budget and are unchanged for the 2026/27 tax year. Before that date, the rates were 10% and 20% on most assets, so the increases are substantial.

For most limited company directors, your income from salary and dividends will already push you into the higher-rate band. That means the majority of capital gains you realise outside Business Asset Disposal Relief will be taxed at 24%. The 18% basic-rate band only applies where your total taxable income plus the gain does not exceed the higher-rate threshold, which is £50,270 in 2026/27. Directors earning above that threshold through a combination of salary and dividends rarely have unused basic-rate band available.

Residential property disposals attract the same 18% and 24% rates as other assets, having aligned with the main rates in October 2024. Trustees and personal representatives of deceased estates pay 24% on most assets. You can verify the current rates on GOV.UK Capital Gains Tax rates.

How the £3,000 Annual Exempt Amount Works for Directors

Every individual has a £3,000 annual exempt amount in 2026/27. The first £3,000 of your net capital gains each tax year is free of CGT. Net gains means gains less any capital losses realised in the same tax year and any brought-forward losses from earlier years. The exemption applies to the net figure, not each disposal separately.

The exempt amount cannot be carried forward. If you do not realise gains this tax year, you lose the benefit of the £3,000 for 2026/27. This matters most for directors who hold shares in investment portfolios or have unrealised gains on business assets: disposing of assets with up to £3,000 of gain each year, spread across multiple tax years, can shelter meaningful sums from CGT over time. A director who does this consistently for five years shelters £15,000 of gains without any tax, and at 24% that is £3,600 saved.

Spouses and civil partners each have their own £3,000 exemption. Transferring assets to a spouse before disposal, where that transfer itself generates no gain (see the FAQ section below on spousal transfers), lets the couple use two exemptions in the same year: £6,000 combined in 2026/27. For directors whose income positions differ, the transfer also allows the spouse with the lower tax rate to realise the gain at 18% rather than 24%. Reviewing your year-end tax position well before 5 April is the best way to capture these opportunities. Our annual tax review checklist for directors covers the full list of year-end actions.

BADR for Directors: How the 18% Rate Works on Company Share Disposals

Business Asset Disposal Relief (BADR) reduces the CGT rate to 18% on qualifying disposals of business assets, including shares in your own company. From 6 April 2026, the BADR rate is 18% — up from 14% in 2025/26 and 10% before April 2025. The relief applies to the first £1 million of qualifying lifetime gains per individual. Gains above the lifetime limit are taxed at the standard higher-rate CGT rate of 24%.

To qualify for BADR on a company share disposal, you must satisfy four conditions throughout the 24 months immediately before the disposal: hold at least 5% of ordinary share capital and 5% of voting rights; be entitled to at least 5% of distributable profits or net assets; be an employee or office-holder (including director) of the company; and the company must be a trading business, not an investment vehicle. Most agency founders will meet these tests without difficulty, but the 24-month clock matters: any share restructuring or conversion to a limited company in the two years before a sale should be reviewed specifically against the BADR qualifying conditions.

The practical difference between BADR and the standard rate is now 6 percentage points (18% versus 24%). On a £500,000 gain, that is £30,000 of tax saved. On the full £1 million lifetime limit, the maximum saving is £60,000. While this is meaningfully less than when BADR was 10% — when the saving on £1 million was £140,000 — the relief remains worth claiming where you qualify. Our guide to the BADR rate change and agency exits covers the anti-forestalling rules and how to structure the claim.

Using Pension Contributions to Reduce CGT as a Director

The most underused CGT planning tool for limited company directors is the pension contribution. Most directors think of pension contributions in the context of income tax savings on salary or dividends. Fewer consider how a pension contribution affects their CGT position.

Pension contributions reduce your adjusted net income. That matters for CGT because your basic-rate income tax band is calculated after your adjusted net income is determined. A director whose total income from salary, dividends, and other sources is £55,000 in 2026/27 sits entirely above the higher-rate threshold of £50,270. All their capital gains would normally be taxed at 24%. But if that same director makes an additional pension contribution of £5,000, their adjusted net income falls to £50,000, opening up £270 of basic-rate band. Gains up to that £270 would be taxed at 18% rather than 24%.

For directors with larger gaps between their income and the higher-rate threshold, or who intend to realise a substantial gain in the same tax year as making a pension contribution, this interaction can be significant. A director with income of £60,000 who contributes £10,000 to their pension moves £10,000 of basic-rate band below their income, making it available to gains. If they then realise a £10,000 gain, that gain is taxed at 18% rather than 24%: a saving of £600. The employer pension contribution itself attracts corporation tax relief at 25%, making the combined tax efficiency considerably higher than the CGT saving alone. Use the director salary and dividend calculator to model your current income position before planning a disposal.

The annual pension allowance is £60,000 in 2026/27 (tapered for those with adjusted income above £260,000). Unused allowance from the previous three tax years can be carried forward, giving some directors the ability to make a larger single-year contribution where they plan a significant disposal. A specialist accountant can model this alongside your CGT position before you commit to either the disposal or the contribution.

CGT on Selling Your Limited Company Shares: What Directors Need to Know

When a director sells shares in their own limited company, the gain is calculated as the sale proceeds minus the original acquisition cost (the base cost) and any allowable enhancement expenditure. For many founders, the base cost of their shares is nominal — often just the par value of £1 or £0.01 per share. This means the entire sale proceeds above that negligible base cost is a taxable gain, subject to the annual exempt amount and any applicable reliefs.

If you sell your company to a trade buyer or private equity, the sale price is usually structured partly as upfront consideration and partly as earn-out. The upfront element is straightforward: it is a capital disposal in the tax year of completion, and CGT is calculated on the gain. Earn-outs are more complex. Deferred consideration that is contingent on future performance can either be taxed as a capital gain at the time of disposal (if treated as an ascertainable amount) or as income if structured as employment remuneration. The distinction has a significant impact on your tax rate, and the structure should be agreed before heads of terms are signed. Our guide to agency valuation and exit planning covers the most common deal structures and their tax treatment.

Capital losses from other disposals in the same tax year — for example, shares in a different company that have fallen in value — can be set against the gain on your company shares before applying the annual exempt amount. Losses carried forward from earlier years are used after the annual exempt amount has been applied, so they reduce the gain that remains after the £3,000 exemption, not the gross gain.

How to Report and Pay Capital Gains Tax: Deadlines for Directors

For most assets, including shares in an unquoted limited company, CGT is reported through your Self Assessment tax return. Gains made between 6 April 2026 and 5 April 2027 are declared on the 2026/27 tax return. The filing and payment deadline is 31 January 2028. You must report gains through Self Assessment even if your total gains are below the £3,000 exempt amount, provided your total disposal proceeds in the year exceed £50,000.

UK residential property disposals that result in a CGT liability follow a different and much stricter timetable. You must report and pay any CGT due within 60 days of completion. This is not the exchange date, but the date the property legally transfers. Missing this deadline triggers automatic penalties from HMRC: £100 for up to six months late, rising to £300 or 5% of the tax due (whichever is greater) after 12 months. If you are a director who also holds UK residential property, the two deadlines need to be tracked separately.

Interest on unpaid CGT runs from 31 January following the tax year end for most assets. For residential property, interest runs from the 60-day deadline. Where you have made disposals close to the tax year end and are uncertain whether they result in a gain or a loss, getting an accountant to prepare a provisional computation before the 31 January deadline avoids the risk of underpayment interest and penalties.

How Alto Accounting Can Help

We work with UK limited company directors who face real CGT decisions: whether to dispose of company shares this year or next, how to structure a sale or earn-out, and how to use pension contributions and spousal transfers to manage the CGT rate on a planned disposal. As an ACCA registered practice, we prepare Self Assessment returns that capture every available relief, carry forward losses correctly, and file on time.

Book a free consultation to speak with a specialist before your next disposal.

Frequently Asked Questions