Capital gains tax and estate planning sit side by side whenever you pass assets to the next generation. Whether you are gifting shares to your children, transferring a buy-to-let into a family trust or simply making sure your Will is tax-efficient, the two regimes often overlap. In 2023/24, HMRC collected £17.8 billion in CGT – a 42% rise since 2019 (HMRC, 2024) – and the annual exempt amount will stand at just £3,000 for 2025/26. At the same time, the Office for Budget Responsibility expects receipts to climb further as frozen tax thresholds bite (OBR, 2024). Against that backdrop, well-structured capital gains tax and estate planning can protect hard-won wealth and keep more money in the family.
In this article, we unpack when CGT arises, where the main reliefs lie, how the “uplift on death” works and why gifting assets too late can trigger an unnecessary bill. Along the way, you will find real-world examples and practical tips drawn from the digital tools and advisory work we use every day with clients. By understanding the interaction between capital gains tax and estate planning, you can make clearer, quicker decisions and avoid surprises later on.
Where capital gains tax fits when you pass on assets
Capital gains tax applies when you dispose of a chargeable asset and make a profit that exceeds your annual exemption. “Dispose” includes selling, exchanging, gifting or even giving an asset away for less than it is worth. For estate planning purposes, the key disposals are:
- Lifetime gifts to individuals
- Transfers to most types of trust
- The deemed disposal that happens if you die owning the asset
Because CGT is calculated at the point of disposal, timing is everything. A shareholding that has risen £40,000 since you bought it looks very different if you give it away while alive (potential CGT of up to £7,400 at 20%) versus letting it pass on death (no CGT because of the uplift). Knowing when the tax crystallises is the first step in sound capital gains tax and estate planning.
Integrating capital gains tax and estate planning in practice
Estate planning starts with understanding your goals – helping children onto the property ladder, funding school fees, or ensuring business continuity. Once your goals are clear we can layer the tax rules on top:
- Assess current asset base: Market value, acquisition cost, unrealised gains.
- Match assets to beneficiaries: Who needs income now, who can wait.
- Choose the route: Outright gift, trust, family investment company or will-based transfer.
- Test the numbers: CGT, inheritance tax (IHT) and cashflow impact.
- Implement and review: Automated valuations, cloud-based records and annual check-ins.
Digital accounting platforms make the data gathering painless, giving you the confidence to act at the right time.
Lifetime disposals – rates and allowances
For 2025/26 the main CGT rates remain:
- Basic-rate band gains on non-residential assets: 10%
- Higher or additional-rate band gains: 20%
- Gains on residential property (other than the main home): 18% and 24%
Your annual exempt amount is £3,000. Couples who are married or in a civil partnership can double up by transferring assets between themselves free of CGT.
Example: Alex, a higher-rate taxpayer, bought a portfolio of listed shares for £30,000. It is now worth £90,000. If Alex gifts the shares to his adult daughter this year, the £60,000 gain is chargeable. After the annual exemption, £57,000 remains, producing CGT of £11,400 at 20%. If Alex is likely to pass awaywithin seven years, holding until death could shelter the gain entirely while still being IHT-efficient thanks to the uplift.
Key exemptions and reliefs
Certain assets and situations cut or defer the tax:
- Principal private residence relief: Most disposals of your main home are CGT-free.
- Business asset disposal relief: Lifetime limit £1 million, 10% rate on qualifying trading business disposals.
- Hold-over relief on gifts to trust: Gain is deferred until the trustees dispose of the asset.
- Rollover relief on business assets: Reinvest proceeds within three years to postpone CGT.
Choosing the right relief is central to effective capital gains tax and estate planning – and sometimes it is better to pay CGT now to save more IHT later.
The uplift on death – why it matters
When you die, beneficiaries inherit most assets at their market value on the date of death. This is the “uplift on death”. Any unrealised gain to that point disappears for CGT purposes, although the asset may form part of the IHT estate.
According to the ONS, 1 in 5 UK adults will be aged 65 or over by 2035 (ONS, 2024). As more estates fall within IHT and CGT, using the uplift wisely becomes critical. For example, retaining a highly appreciated second property until death can wipe out the CGT, whereas gifting it during your lifetime can trigger a large bill and still leave the asset within your IHT estate for seven years.
Gifting assets: Traps and opportunities
Gifts are often the first tool people think of, yet they can backfire without advice:
- Timing: You must survive seven years to remove the gift from the IHT estate but CGT is due immediately.
- Cashflow: Paying CGT from personal funds depletes your estate; if the recipient pays, you are taxed as if you had received the money.
- Spousal transfers: No CGT, but both spouses’ IHT nil-rate bands remain unused until the second death.
- Trusts: Hold-over relief can defer CGT, but the transfer may attract a 20% lifetime IHT charge if it exceeds the nil-rate band.
Balancing the two taxes is the art of capital gains tax and estate planning.
Practical steps to lower the bill
Annual planning beats last-minute rushing. Clients who work with us typically follow these simple practices:
- Annual portfolio review: Harvest gains up to the exemption each tax year.
- Family equalisation: Spread ownership between spouses and adult children to exploit basic-rate bands.
- Business reinvestment: Use rollover relief where trading assets are renewed.
- Life assurance: Fund any unavoidable CGT from an insurance pay-out rather than the estate.
- Digital records: Maintain acquisition dates and costs in cloud software to avoid estimate-based returns.
You can read more on our tax planning pages.
Next steps for securing your family’s future
Passing wealth on is as much about peace of mind as it is about numbers. By approaching capital gains tax and estate planning as one continuous process, you give yourself options: the freedom to help children sooner, the reassurance that your estate will not be hit by an avoidable double tax, and the clarity that comes from reliable digital data. Rates and allowances will evolve, but the principles outlined above – early action, careful sequencing and informed use of reliefs – remain constant.
If you are considering a gift, a trust or a simple portfolio tidy-up, let’s talk before the disposal happens. Our tax team combines up-to-date technical knowledge with cloud-based modelling to show the impact in minutes. Book an initial call today and discover how capital gains tax and estate planning can work together to safeguard your family’s future.