What is Capital Gains Tax?
Capital Gains Tax (CGT) is charged on the profit you make when you sell (or "dispose of") an asset that has increased in value. You're taxed on the gain, not the full sale price. Common assets subject to CGT include shares, investment property, business assets, and valuable personal possessions worth more than £6,000.
Your main home is usually exempt from CGT under Private Residence Relief — more on that below.
Annual exempt amount (2025–26)
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Calculate your capital gain →Everyone gets a tax-free CGT allowance each year. For 2025–26 it remains at £3,000 — a significant reduction from the £12,300 allowance that applied before April 2023. Gains below this amount are not taxed. You cannot carry unused allowance forward to future years, so it can be worth considering whether to crystallise gains each year up to the limit.
CGT rates after the October 2024 Budget
The Autumn 2024 Budget raised CGT rates significantly. The rates now depend on whether you are a basic-rate or higher-rate taxpayer (based on your total income including the gain), and whether the asset is residential property or something else:
| Asset type | Basic-rate taxpayer | Higher/additional-rate taxpayer |
|---|---|---|
| Residential property | 18% | 24% |
| Shares & other assets | 18% | 24% |
| Business assets (BADR) | 14% (rising to 18% from April 2026) | |
Note: the previous distinction between 10%/20% for shares and 18%/28% for property has been compressed. All standard asset classes now sit at 18%/24%.
How to calculate your gain
Your taxable gain is: sale proceeds − original cost − allowable costs − annual exempt amount.
Allowable costs include: the original purchase price, buying and selling costs (stamp duty, solicitor fees, estate agent fees), and costs of improving the asset (not maintenance). You can also deduct capital losses from previous years before applying the annual exempt amount.
Residential property: 60-day reporting
If you sell a UK residential property and make a taxable gain, you must report it to HMRC and pay any CGT due within 60 days of completion. This applies even if you normally file a Self Assessment return. Failure to report on time results in penalties and interest charges.
You report and pay via the UK Property Account on the HMRC website.
Key reliefs
Private Residence Relief (PRR): If the property has been your main home for the entire period of ownership, the full gain is usually exempt. If you let it out or used part of it as a business, only a proportion of the gain is exempt.
Business Asset Disposal Relief (BADR): Formerly Entrepreneurs' Relief. Qualifying business disposals (sole traders, partnerships, company shares in your own company) attract CGT at 14% (2025–26) on gains up to a lifetime limit of £1 million.
Gift Relief: When gifting a business asset, you and the recipient can jointly elect to defer the gain until they sell. The gain is effectively passed to the recipient at your cost price.
ISA wrapper: Gains on investments held inside a Stocks & Shares ISA are entirely exempt from CGT. Maximising your ISA allowance (£20,000 per year) is one of the best ways to shelter investment growth.