Capital Gains Tax investigations are on the rise: Here’s how to avoid any mistakes

There’s a good chance that when you sell one of your assets, you end up incurring Capital Gains Tax (CGT).

For instance, you might need to consider CGT when you sell a second home or dispose of investments held outside an ISA.

Careful planning could help you reduce the tax you pay. Yet, mistakes can be costly, especially as HMRC appears to be paying close attention to CGT.

In fact, IFA Magazine reports that extra tax collected by HMRC due to CGT investigations rose by 46% in the last year, from £182 million to £266 million.

What’s more, the number of CGT investigations HMRC closed also rose by 26%, from 7,800 to 9,800.

These figures show that even though you may be focused on reducing a CGT bill, it’s also vital to ensure you calculate your gains accurately and report them correctly.

Read on to discover three practical ways to avoid costly CGT mistakes.

1. Understand your allowances and exemptions

Before you sell or transfer an asset, it’s important to understand whether you are due to pay CGT in the first place.

You typically only pay the tax if your overall gains for the tax year exceed your Annual Exempt Amount.

As of 2026/27, this stands at £3,000, but this has fallen significantly in recent years.

In 2022/23, the Annual Exempt Amount stood at £12,300 before falling to £6,000 in 2023/24, then again to £3,000 in 2024/25.

As such, gains that might have once fallen within your allowance could now lead to a CGT bill.

At the same time, the rates themselves have changed. In 2026/27, these are:

18% on gains that fall within the basic-rate band
24% on gains in the higher- or additional-rate bands.

Different rules may apply if you qualify for reliefs such as Business Asset Disposal Relief or Investors’ Relief.

As such, you may need to check the rules carefully before you make a sale, rather than assuming your tax position is the same as it was a few years ago.

You may also need to consider what actually counts as a disposal.

While selling an investment might be a more apparent example, gifting or transferring assets to a loved one could also trigger CGT in some cases.

For instance, if you transfer shares to a family member, HMRC may still treat this as a sale for CGT purposes, meaning you could face a bill even if you haven’t received money in return.

There are also several useful exemptions available. Indeed, you can usually transfer assets between spouses or civil partners without incurring CGT, provided you meet the conditions.

You may also be able to shield investments inside an ISA, where any gains are typically free from CGT.

Just note that the rules can be complex, especially if you hold several portfolios, business assets, or property.

Seeking professional advice before disposing of valuable assets could help you avoid unexpected tax bills and make better use of the allowances available.

2. Report capital losses as well as gains

While you may initially focus on gains when thinking about CGT, losses can be just as important.

In fact, if you dispose of a chargeable asset and make a loss, you may be able to report this to HMRC to reduce your taxable gains.

When you do report a loss, HMRC typically deducts this from the gains you made in the same tax year.

If your taxable gains still exceed your tax-free allowance, you could then deduct unused losses from the previous four tax years after the end of the tax year in which you disposed of the asset.

For instance, imagine you sell one investment and make a gain, but sell another at a loss in the same tax year.

If you fail to include this loss in your calculations, you could pay more CGT than necessary.

Similarly, if you made a loss in a previous tax year but failed to record or report it properly, you may miss your chance to use it against future gains.

It’s worth remembering that you don’t always have to report a loss immediately. However, waiting could make it more challenging to find the right paperwork or calculate the loss accurately.

It may be prudent to record losses as they happen, even if you don’t need to use them straight away.

3. Keep careful records of asset disposals

Perhaps one of the simplest ways to reduce the risk of a CGT investigation is to keep careful records. If HMRC asks you about a disposal, you may be required to show exactly how you calculated the gain or loss.

This could include evidence of:

The date you bought and sold the asset
The amount you originally paid
The price of the sale
Professional fees
Any reliefs or exemptions you claimed
Any losses you reported.

If you sell a second property, you may need accurate valuations, estate agent invoices, and copies of any other relevant paperwork.

Meanwhile, when buying and selling investments outside an ISA, you may need portfolio statements, dividend reinvestment records, and evidence of previous transfers.

This is especially vital given that HMRC may challenge how your assets have been valued. If valuations are too low, it may argue that you’ve underestimated your gain and underpaid CGT.

Keeping organised records could also help you make better decisions more generally.

For example, if you know the original purchase price of an asset and the likely gain on its disposal, you could decide whether to sell it now, spread the disposal across various tax years, or transfer assets to a spouse or civil partner.

A financial planner can help you stay on the right side of Capital Gains Tax rules

As you can see, CGT planning often requires careful timing, accurate calculations, and a proper understanding of the rules.

A financial planner could help you assess your assets and identify where any future CGT liability may occur.

This could include:

Investments held outside your ISAs
Second properties
Business assets
Assets you intend to pass to loved ones.

We can also help you consider ways to reduce a potential bill. For instance, you may be able to use your Annual Exempt Amount, spread disposals across tax years, or offset any reported losses.

This careful planning could help you reduce the amount of CGT you pay while avoiding mistakes that could attract unwanted attention from HMRC.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.