What is taper relief, and does it still apply to UK Capital Gains Tax? No. Taper relief was abolished for Capital Gains Tax on 6 April 2008, so holding an asset for many years no longer reduces the taxable gain when you sell it in 2026. Many people still ask about taper relief because they remember older rules, or because a parent or adviser once told them that long ownership “cuts the tax”.
Today, a gain on a second home, a buy-to-let, shares or a business is taxed at the full rate regardless of how long you have owned it. For the 2026/27 tax year, Capital Gains Tax is charged at 18% within your unused basic rate band and 24% above it, and the annual exempt amount is just £3,000. For the official figures, see GOV.UK’s Capital Gains Tax rates guidance.
This guide explains how taper relief used to work, why it was scrapped, what replaced it, where taper relief still exists in the UK tax system (it does, for Inheritance Tax), and the reliefs that can legally reduce your bill today.
What Was Taper Relief for Capital Gains Tax?
Taper relief was introduced by the Finance Act 1998 and applied to disposals by individuals and trustees from 6 April 1998. It replaced the indexation allowance, which had increased the cost of an asset in line with inflation. Instead of an inflation adjustment, this relief reduced the chargeable gain according to the number of complete years an asset had been held after 5 April 1998.
The longer you owned the asset, the bigger the reduction. The rules split assets into two categories:
- Business assets: after the rules were extended in April 2002, business assets qualified for the maximum taper of 75% after just two complete years. For a higher rate taxpayer paying 40%, this produced an effective Capital Gains Tax rate of 10%.
- Non-business assets: second homes, let property and most investment shares received a slower taper. No relief applied for the first two years, then the gain reduced by 5% a year, reaching a maximum of 40% after ten complete years.
- The bonus year: non-business assets already owned on 17 March 1998 received an extra year added to the qualifying holding period.
Under the old regime, gains were taxed at the individual’s marginal income tax rate (10%, 20% or 40%), so taper relief made a real difference to the final bill. A buy-to-let held for ten years could see 40% of its gain taken out of charge completely.
When and Why Was Taper Relief Abolished?
This relief was abolished for all disposals on or after 6 April 2008 by the Finance Act 2008. At the same time, the government removed indexation allowance for individuals and trustees and replaced the whole system with a single flat rate of 18%.
The reasons given at the time were simplicity and fairness. The taper rules had become complicated, especially for shares that moved between business and non-business status, and the 10% effective rate on business assets was seen as too generous for some investors. To protect genuine entrepreneurs, the government introduced Entrepreneurs’ Relief in its place.
The key point for anyone selling today is simple: no taper relief is available for Capital Gains Tax disposals in 2026/27, no matter when the asset was bought. If you owned shares or property back in 1998 and sell them now, the full gain since acquisition is chargeable, subject only to the reliefs that still exist.
What happened to indexation allowance?
Indexation allowance for individuals was frozen at April 1998 and then removed completely from April 2008. Companies kept indexation allowance for longer, but it was frozen at December 2017 for Corporation Tax on chargeable gains. If you are selling through a limited company, indexation up to December 2017 may still reduce the gain, but this relief has never applied to companies.
Taper Relief Timeline at a Glance
| Date | Change | Effect on Capital Gains Tax |
|---|---|---|
| 6 April 1998 | Taper relief introduced | Indexation frozen; gains reduced by holding period |
| 6 April 2002 | Business asset taper accelerated | Maximum 75% taper relief after two years |
| 6 April 2008 | Taper relief abolished | Flat 18% rate; Entrepreneurs’ Relief introduced at 10% |
| 6 April 2020 | Entrepreneurs’ Relief renamed | Business Asset Disposal Relief; lifetime limit cut to £1m |
| 30 October 2024 | Main rates increased | 18% and 24% for all assets |
| 6 April 2026 | BADR rate rises | Business Asset Disposal Relief rate now 18% |
What Replaced Taper Relief?
For business owners, the closest modern equivalent to business asset taper relief is Business Asset Disposal Relief (formerly Entrepreneurs’ Relief). It started at 10% in 2008 and stayed at that rate for many years, but the gap with the main rate has now closed:
- Up to 5 April 2025: 10% on qualifying gains.
- 2025/26 tax year: 14% on qualifying gains.
- From 6 April 2026: 18% on qualifying gains, against 24% for higher rate taxpayers without the relief.
- Lifetime limit: £1 million of qualifying gains.
Investors’ Relief follows the same rates and also has a £1 million lifetime limit. Unlike the old business asset taper, both reliefs have strict qualifying conditions, such as holding at least 5% of an employer company for two years for Business Asset Disposal Relief.
For property investors and holders of ordinary shares, nothing replaced non-business taper. The only automatic protection is the annual exempt amount, which has fallen from £12,300 in 2022/23 to £3,000 for 2026.
Worked Example – Taper Relief Then and Now
Consider an investor who bought a buy-to-let flat in April 1999 and makes a gain of £60,000 after allowable costs. The investor is a higher rate taxpayer.
Under the taper relief rules (sale in 2007/08)
After eight complete years of ownership, non-business taper reduced the gain by 30%. The chargeable gain fell to £42,000. Ignoring the annual exemption for simplicity, tax at 40% came to £16,800.
Under today’s rules (sale in 2026/27)
No taper applies. The investor deducts the £3,000 annual exempt amount, leaving £57,000 taxable at 24%, a bill of £13,680.
What the comparison shows
The headline rate is lower today, but the whole gain is taxed. Because property values have grown so much since the late 1990s, many long-term owners now face larger bills than they expected. The 60-day reporting rule for UK residential property also means the tax is due far sooner than under the old self assessment timetable. Read our guide on how to report UK property CGT in 60 days.
Where Taper Relief Still Applies – Inheritance Tax
Taper relief still exists in the UK, but only for Inheritance Tax. This is the main source of confusion. If you give away money or property and die within seven years, the gift is a potentially exempt transfer that may become chargeable. Inheritance Tax taper reduces the tax on that gift if you survive at least three years:
| Years between gift and death | Taper relief | Effective Inheritance Tax rate |
|---|---|---|
| Less than 3 years | None | 40% |
| 3 to 4 years | 20% | 32% |
| 4 to 5 years | 40% | 24% |
| 5 to 6 years | 60% | 16% |
| 6 to 7 years | 80% | 8% |
| 7 years or more | Gift falls out of charge | 0% |
Two points are often misunderstood. First, Inheritance Tax taper relief reduces the tax, not the value of the gift. Second, it only helps where gifts exceed the £325,000 nil-rate band, because gifts within the band carry no tax to reduce. Full details are on GOV.UK’s Inheritance Tax gifts page.
Gifting a property can also trigger Capital Gains Tax immediately, because a gift is treated as a sale at market value. Inheritance Tax taper does nothing to reduce that CGT charge. Our article on gifting property and Capital Gains Tax explains how the two taxes interact.
Reliefs That Reduce Capital Gains Tax Today
Although taper relief is gone, several reliefs can still reduce or defer Capital Gains Tax in 2026/27:
- Private Residence Relief: exempts gains on your main home, plus the final nine months of ownership. See what Private Residence Relief covers.
- Spousal transfers: assets pass between spouses and civil partners on a no gain, no loss basis, so both annual exempt amounts and basic rate bands can be used.
- Capital losses: losses in the same or earlier tax years reduce your gains. See our guide to using capital losses.
- Allowable costs: purchase and selling costs, Stamp Duty Land Tax and capital improvements all reduce the gain.
- Gift holdover and rollover relief: defer gains on qualifying business assets and certain trust transfers.
- EIS deferral relief: reinvesting a gain into qualifying Enterprise Investment Scheme shares defers the tax.
If you held an asset on 31 March 1982, its base cost is rebased to its market value on that date, which can still reduce gains on very old assets. This is not taper relief, but it is one of the few rules where the length of ownership still matters.
Getting Specialist Help With Old Assets
Assets bought before 2008 often come with incomplete records, mixed periods of use and historic valuations. Getting the base cost right, claiming every allowable improvement and applying 1982 rebasing correctly can be worth thousands of pounds.
Our ACCA-qualified team at Capital Gains Tax Experts specialises in exactly these calculations. We review your purchase history, identify every relief you are still entitled to, and file your HMRC return on time.
Official guidance: For HMRC’s own rules, see GOV.UK’s guidance on Capital Gains Tax: what you pay it on, rates and allowances and tax when you sell property.
Frequently Asked Questions
Is taper relief still available?
No. Taper relief for Capital Gains Tax was abolished for all disposals on or after 6 April 2008. Gains made in 2026/27 are taxed at 18% or 24% after the £3,000 annual exempt amount, no matter how long you have owned the asset. Taper relief now only exists for Inheritance Tax on lifetime gifts.
How much is taper relief?
Under the old Capital Gains Tax rules, business assets qualified for up to 75% taper relief after two years, giving higher rate taxpayers an effective rate of 10%. Non-business assets qualified for up to 40% after ten years, an effective rate of 24%. For Inheritance Tax, taper relief reduces the tax on a gift by 20% to 80%, depending on how long the donor survives.
How does taper relief work?
Before April 2008, taper relief reduced a chargeable gain by a percentage based on the number of complete years an asset was held after 5 April 1998. Today, Inheritance Tax taper relief works differently: it reduces the tax due on gifts made three to seven years before death, where those gifts exceed the £325,000 nil-rate band.
Is capital gains tax changing in April 2026?
The main rates of 18% and 24% and the £3,000 annual exempt amount stay the same for 2026/27. The key change from 6 April 2026 is that Business Asset Disposal Relief and Investors’ Relief rise from 14% to 18%, the same as the lower main rate.
What are the reliefs available on capital gains tax?
The main reliefs are Private Residence Relief on your home, Business Asset Disposal Relief, Investors’ Relief, gift holdover relief, rollover relief, EIS deferral relief and the no gain, no loss rule for transfers between spouses. You can also deduct capital losses and use your £3,000 annual exempt amount.
What is a simple trick for avoiding capital gains tax?
There is no single trick, but the simplest legal step is to hold investments inside an ISA or pension, where gains are free from Capital Gains Tax. Using your annual exempt amount every tax year and sharing assets with a spouse or civil partner can also reduce the tax legally.
Conclusion
The old taper regime is a piece of tax history for Capital Gains Tax purposes. Since April 2008, the length of time you hold an asset no longer reduces your gain, and with rates at 18% and 24% and an annual exempt amount of only £3,000, long-held property and shares can produce substantial bills.
The good news is that genuine reliefs remain available. Careful use of spousal transfers, capital losses, allowable costs and Private Residence Relief can still make a significant difference.
If you are planning to sell an asset you have owned for many years, contact our team at Capital Gains Tax Experts for a fixed-fee review. Call us on +44 (0)1204 859315 or try our free CGT calculator to get an instant estimate.
