Understanding Capital Gains Tax and the Role of Accountants in Tax Deferrals

Capital Gains Tax (CGT) is a tax levied on the profit made from selling or disposing of assets that have increased in value, such as property, shares, or businesses. For UK taxpayers, understanding CGT and its potential deferral options is crucial for effective financial planning. This article explores whether capital gains tax accountants offer advice on tax deferrals, diving into the mechanisms, benefits, and practical applications for UK taxpayers in 2025. In this first part, we’ll cover the basics of CGT, the importance of tax deferrals, key statistics, and how accountants assist in navigating these complexities.

What is Capital Gains Tax in the UK?

Capital Gains Tax in the UK applies to the profit (or "gain") made when you sell or dispose of assets like investment properties, stocks, shares, cryptocurrencies, or business assets. According to HMRC, the tax is calculated on the difference between the sale price and the purchase price (or market value at acquisition), minus allowable expenses such as legal fees or improvement costs. For the 2024/25 tax year, the CGT annual exempt amount is £3,000, meaning you can make gains up to this threshold without paying tax. Any gains above this are taxed at rates depending on your income tax band and the type of asset:

• Residential property (not your main home): 18% for basic-rate taxpayers, 24% for higher-rate taxpayers (as of 30 October 2024).

• Other assets (e.g., shares, crypto): 18% for basic-rate taxpayers, 24% for higher-rate taxpayers (increased from 10% and 20% respectively on 30 October 2024).

• Carried interest (e.g., private equity): 32% from 6 April 2025.

• Business Asset Disposal Relief (BADR): 14% from 6 April 2025, increasing to 18% from 6 April 2026.

In 2024/25, CGT raised approximately £15 billion, accounting for less than 2% of total UK tax revenue, with around 350,000 individuals (0.65% of the adult population) paying it. Notably, 3% of CGT taxpayers with gains over £1 million accounted for two-thirds of CGT revenue, highlighting the tax’s impact on high-net-worth individuals.

The Importance of Tax Deferrals

Tax deferrals allow taxpayers to postpone paying CGT, preserving cash flow for reinvestment or other financial goals. Deferring CGT does not eliminate the tax liability but delays it, often indefinitely, if structured correctly. Common deferral methods include:

• Rollover Relief: Reinvesting gains from selling a business asset into another qualifying business asset.

• Enterprise Investment Scheme (EIS): Deferring CGT by investing gains into qualifying small, high-risk UK companies.

• Seed Enterprise Investment Scheme (SEIS): Similar to EIS but for smaller startups, offering deferral and additional tax reliefs.

• Instalment Payments: In cases of deferred consideration (e.g., selling an asset with payments spread over time), taxpayers may apply to HMRC to pay CGT in instalments.

Deferrals are particularly valuable given the recent reduction in the CGT allowance from £12,300 in 2022/23 to £3,000 in 2024/25, making more disposals taxable. With HMRC’s 60-day reporting rule for property sales, timely advice is critical to avoid penalties.

Do Capital Gains Tax Accountants Offer Deferral Advice?

Yes, capital gains tax accountants are instrumental in advising on tax deferrals. Their expertise helps taxpayers navigate complex HMRC rules, identify eligible reliefs, and structure transactions to minimize or defer tax liabilities. Here’s how they assist:

• Strategic Tax Planning: Accountants analyze your financial situation to recommend deferral strategies, such as timing asset sales to maximize the use of the annual exempt amount or transferring assets to a spouse to double the allowance.

• Relief Identification: They identify applicable reliefs like EIS, SEIS, or Rollover Relief, ensuring compliance with strict conditions. For instance, EIS investments must be held for at least three years to maintain deferral benefits.

• Compliance and Reporting: Accountants ensure accurate CGT calculations and timely reporting, especially for the 60-day property disposal rule, which carries penalties for non-compliance.

• Complex Scenarios: For high-value transactions or mixed-use assets, accountants provide tailored advice to optimize tax outcomes.

For example, consider Sarah, a UK landlord selling a buy-to-let property in 2025 for £300,000, purchased for £200,000. Her gain is £100,000. After deducting the £3,000 allowance, her taxable gain is £97,000. As a higher-rate taxpayer, she faces a 24% CGT rate (£23,280). An accountant might advise her to invest £97,000 into an EIS company, deferring the CGT liability indefinitely while also claiming income tax relief. Without professional advice, Sarah might miss this opportunity and pay the full tax upfront.

Key CGT Statistics for 2025

To underscore the importance of professional advice, here are key CGT statistics for the UK in 2024/25 and 2025/26, sourced from HMRC and industry reports:

• Annual Exempt Amount: £3,000 (unchanged from 2024/25 to 2025/26).

• CGT Revenue: Forecast to rise from £15 billion in 2024/25 to £16.44 billion in 2025/26 due to rate increases and tightened allowances.

• Taxpayers Affected: Approximately 264,000 individuals will pay more CGT in 2025/26 due to rate hikes (18% and 24% for non-property assets).

• EIS Investment: Over £22 billion has been invested in 31,000+ companies through EIS since 1994, with £1 million annual investment limits per individual.

• Property Disposals: Around 50% of taxable gains relate to unlisted shares, but property sales dominate individual CGT liabilities.

• Penalties for Late Reporting: Missing the 60-day property disposal reporting deadline can result in fines starting at £100, plus interest on unpaid tax.

These figures highlight the growing relevance of CGT planning, especially as allowances shrink and rates rise, making deferral strategies more attractive.

Why Consult a CGT Accountant?

CGT rules are complex, with frequent changes, such as the rate increases announced in the 2024 Autumn Budget. Accountants stay updated on HMRC regulations, ensuring compliance and maximizing savings. For instance, HMRC’s digital tools are increasingly used to detect errors, and poor record-keeping can lead to costly mistakes. A CGT accountant can:

• Maintain accurate records of acquisition costs, improvements, and sale proceeds.

• Advise on anti-forestalling rules affecting disposals before 30 October 2024.

• Help non-residents navigate CGT on UK property, where the 60-day reporting rule applies.

A real-life example involves John, a small business owner selling his company in 2025. His gain of £500,000 qualifies for Business Asset Disposal Relief (14% rate). An accountant advises reinvesting part of the gain into an EIS to defer tax on the portion exceeding the £1 million BADR lifetime limit, saving thousands in immediate tax.

Tax Deferral Strategies and Real-Life Applications

In this second part, we delve into the specific tax deferral strategies available to UK taxpayers in 2025, how capital gains tax accountants implement them, and real-life applications through examples and a case study. These strategies are designed to help taxpayers manage their CGT liabilities effectively, preserve wealth, and comply with HMRC regulations. By understanding these options, you can make informed decisions about asset disposals and leverage professional advice to optimize outcomes.

Key Tax Deferral Strategies

Capital gains tax accountants offer expert guidance on several deferral mechanisms, each with specific eligibility criteria and benefits. Below are the primary strategies available in 2025:

Rollover Relief

Rollover relief allows business owners to defer CGT when selling a business asset by reinvesting the proceeds into another qualifying business asset. The gain is “rolled over” into the new asset, deferring tax until the new asset is sold. Qualifying assets include land, buildings, or fixed plant and machinery used in a trade.

Example: Emma, a sole trader, sells a commercial property for £400,000 in 2025, with a gain of £150,000. She reinvests the proceeds into new business premises within three years. Her accountant ensures the reinvestment meets HMRC’s strict conditions, deferring the £150,000 gain. Without rollover relief, Emma would face a CGT bill of £36,000 (24% on £150,000 after the £3,000 allowance).

Enterprise Investment Scheme (EIS)

EIS allows taxpayers to defer CGT by investing gains into qualifying small, high-risk UK companies. The investment must be held for at least three years, and up to £1 million (or £2 million in some cases) can be invested annually. EIS also offers income tax relief of 30% on the invested amount.

Example: Mark sells shares for a £200,000 gain in 2025. His accountant advises investing £194,000 (after the £3,000 allowance) into an EIS company. This defers the CGT liability of £46,560 (24%) and provides £58,200 in income tax relief. If Mark holds the investment long-term, the deferral could become indefinite.

Seed Enterprise Investment Scheme (SEIS)

SEIS is similar to EIS but targets smaller startups, with a maximum investment of £200,000 per year. It offers 50% income tax relief and CGT deferral, making it attractive for smaller gains.

Example: Lisa, a freelancer, sells a rental property with a £50,000 gain. Her accountant suggests investing £47,000 into an SEIS company, deferring the £11,280 CGT bill and securing £23,500 in income tax relief. This dual benefit maximizes her tax savings.

Instalment Payments

For disposals involving deferred consideration (e.g., payments spread over years), taxpayers can apply to HMRC to pay CGT in installments. This is particularly useful when cash flow is limited.

Example: Tom sells a business for £1 million, with £500,000 paid upfront and £500,000 in installments over five years. His accountant calculates a £600,000 gain and negotiates with HMRC to pay the CGT in installments, easing the financial burden.

Case Study: Deferring CGT for a Property Investor

Client: Rachel, a 45-year-old property investor in London
Scenario: In January 2025, Rachel sells a buy-to-let property for £500,000, purchased for £300,000 in 2010. She incurs £10,000 in legal and estate agent fees and spent £20,000 on improvements. Her taxable gain is calculated as:

• Sale price: £500,000

• Less purchase price: £300,000

• Less improvements: £20,000

• Less allowable costs: £10,000

• Gain: £170,000

• Less CGT allowance: £3,000

• Taxable gain: £167,000

As a higher-rate taxpayer, Rachel faces a 24% CGT rate, resulting in a £40,080 tax bill, due within 60 days of the sale.

Accountant’s Advice: Rachel’s accountant, a CGT specialist at Butt Miller Chartered Accountants, recommends two deferral strategies:

1. EIS Investment: Rachel invests £167,000 into a qualifying EIS company, deferring the entire CGT liability. She also claims 30% income tax relief (£50,100), reducing her income tax bill for the year.

2. Spouse Transfer: Rachel transfers a portion of her next property to her spouse before selling, doubling the CGT allowance to £6,000 for future disposals.

Outcome: By investing in EIS, Rachel defers her £40,080 CGT bill indefinitely, provided she holds the investment. The income tax relief boosts her cash flow, allowing her to reinvest in another property. Her accountant ensures compliance with HMRC’s 60-day reporting rule, avoiding penalties.

This case study illustrates how CGT accountants tailor deferral strategies to individual circumstances, leveraging reliefs to minimize tax and enhance financial flexibility.

The Role of Accountants in Implementing Deferrals

CGT accountants are essential for implementing deferral strategies effectively. Their services include:

• Eligibility Assessment: Confirming whether assets or investments qualify for reliefs like EIS or Rollover Relief.

• Tax Calculations: Accurately calculating gains, deductions, and tax rates, considering changes like the 2024 rate hikes.

• HMRC Compliance: Ensuring timely reporting, especially for property disposals, and handling instalment applications.

• Long-Term Planning: Structuring investments to align with financial goals, such as retirement or business expansion.

Accountants also mitigate risks, such as HMRC challenging valuations or relief claims. For instance, incorrect valuations of inherited assets can trigger audits, but accountants maintain robust records to defend calculations.

Common Pitfalls to Avoid

Without professional advice, taxpayers risk costly mistakes:

• Missing the 60-Day Deadline: Failing to report property disposals within 60 days incurs fines and interest.

• Non-Qualifying Investments: Investing in non-qualifying EIS or SEIS companies can void deferrals.

• Poor Record-Keeping: Inadequate documentation of costs or improvements can lead to higher tax bills.

A CGT accountant helps avoid these pitfalls, ensuring compliance and maximizing deferral benefits.

Maximizing Tax Deferrals with Professional Guidance

In this final part, we explore how UK taxpayers can maximize tax deferrals with the help of capital gains tax accountants, focusing on advanced strategies, practical tips, and the evolving CGT landscape in 2025. We’ll also address common scenarios faced by taxpayers, provide additional examples, and highlight why professional guidance is indispensable for navigating HMRC’s complex rules.

Advanced Deferral Strategies

Beyond Rollover Relief, EIS, SEIS, and instalment payments, accountants offer advanced strategies to optimize CGT deferrals:

Gift to Spouse or Civil Partner

Transferring assets to a spouse or civil partner is exempt from CGT, allowing couples to double their annual exempt amount (£6,000 for 2025/26). This strategy is effective when one spouse is in a lower tax band or has unused allowances.

Example: David, a higher-rate taxpayer, plans to sell shares with a £50,000 gain. His wife, Sophie, a basic-rate taxpayer, has an unused £3,000 allowance. David transfers half the shares to Sophie before the sale. They each use their £3,000 allowance, reducing the taxable gain to £44,000, split equally. Sophie pays 18% (£3,960) on her £22,000, while David pays 24% (£5,280), saving £1,320 compared to David selling alone.

ISA and Pension Investments

Gains within Individual Savings Accounts (ISAs) or pensions are CGT-free. Accountants recommend maximizing annual ISA contributions (£20,000 in 2025/26) or pension contributions to shelter future gains.

Example: Claire sells a rental property with a £100,000 gain. Her accountant advises investing £20,000 annually into a Stocks and Shares ISA, shielding future investment gains from CGT. The remaining gain is deferred via EIS, balancing immediate and long-term tax savings.

Holdover Relief for Gifts

Holdover relief defers CGT when gifting business assets or certain shares to family members or trusts. The recipient inherits the asset at the original cost, deferring tax until they sell.

Example: Michael gifts his business, worth £2 million, to his son. The gain of £1.5 million qualifies for holdover relief, deferring CGT. His accountant ensures HMRC documentation is complete, avoiding immediate tax.

Practical Tips for UK Taxpayers

To maximize CGT deferrals, consider these tips, guided by accountants:

• Plan Early: Consult an accountant before disposing of assets to structure transactions tax-efficiently. Early planning can leverage reliefs like BADR or EIS.

• Keep Detailed Records: Maintain receipts, legal documents, and improvement costs to substantiate deductions and valuations.

• Monitor Tax Changes: The 2024 Autumn Budget increased CGT rates and reduced the Investors’ Relief lifetime limit to £1 million. Accountants track such changes to adapt strategies.

• Use Tax Wrappers: ISAs and pensions are powerful tools to avoid CGT altogether, complementing deferral strategies.

Evolving CGT Landscape in 2025

The CGT landscape is dynamic, with significant changes in 2025:

• Rate Increases: The 18% and 24% rates for non-property assets, effective from 30 October 2024, increase tax liabilities, making deferrals more appealing.

• BADR and Investors’ Relief: The BADR rate rises to 14% in 2025/26 and 18% in 2026/27, with a £1 million lifetime limit for both reliefs.

• HMRC Scrutiny: Enhanced digital tools mean stricter enforcement. Accountants ensure compliance with reporting and valuation requirements.

• Non-Resident Rules: Non-residents selling UK property must report within 60 days, with accountants guiding on exemptions and reliefs.

These changes underscore the need for professional advice to navigate complexities and avoid penalties.

Real-Life Scenario: Business Sale

Scenario: Priya, a tech entrepreneur, sells her startup in 2025 for £3 million, with a £2.5 million gain. Her accountant at Alexander & Co. advises:

• BADR Application: The first £1 million qualifies for BADR at 14% (£140,000 tax).

• EIS Deferral: The remaining £1.5 million gain is invested in an EIS company, deferring £360,000 in CGT (24%) and securing £450,000 in income tax relief.

• ISA Planning: Future profits are directed to ISAs to avoid CGT.

This strategy saves Priya over £500,000 in immediate tax, allowing reinvestment into her next venture.

Why Professional Guidance is Essential

CGT accountants provide invaluable expertise:

• Customized Solutions: They tailor strategies to your financial goals, whether preserving wealth or funding business growth.

• Risk Mitigation: They navigate anti-forestalling rules and HMRC audits, ensuring compliance.

• Maximizing Reliefs: Accountants identify all applicable reliefs, from Principal Private Residence Relief to holdover relief, reducing tax exposure.

Without professional guidance, taxpayers risk overpaying tax or facing penalties due to errors. For instance, HMRC’s manual notes that losses must be reported correctly to offset gains, a process accountants streamline.