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Why defer a gain?

An individual’s net taxable income and chargeable gains for the tax year influence the rate of tax payable on their capital gains. See the Introduction to capital gains tax guidance note.

Depending on the nature of the asset that is subject to disposal, this can result in the individual paying capital gains tax (CGT) at higher rates where their taxable income exceeds the basic rate band, but at lower rates in years where their taxable income and gains are lower than that band. If a gain is covered by the annual exemption, no CGT is due. See the Introduction to capital gains tax guidance note.

The basic rate band is £37,700 for the 2024/25 and 2025/26 tax years, but this may be extended by personal pension contributions or donations to charity via gift aid. See the Proforma income tax calculation guidance note.

The annual exemption is £3,000 for 2024/25 onwards.

To optimise their CGT position, a taxpayer can reinvest the proceeds from the sale of an asset into the purchase