How UK Capital Gains Tax works
Capital Gains Tax is charged on the profit you make when you dispose of an asset that has increased in value. You pay tax on the gain — the difference between what you paid for the asset and what you received when you sold or otherwise disposed of it — not on the full sale proceeds.
A disposal includes selling an asset, gifting it, transferring it to someone other than your spouse, or receiving insurance proceeds when an asset is destroyed. The tax year runs from 6 April to 5 April. Your CGT liability for 2025/26 covers all disposals made between 6 April 2025 and 5 April 2026.
From 30 October 2024, the main CGT rates changed from 10%/20% to 18%/24% for most assets. Crucially, these rates now match residential property rates, so there is no longer a distinction between property and non-property gains in 2025/26. One rate band, one set of rates, for almost everything.
CGT rates 2025/26
The rate you pay depends on whether your total taxable income plus your taxable gains keeps you within or pushes you above the basic rate band. The basic rate band for 2025/26 is £37,700 (the band above the personal allowance of £12,570, giving a threshold of £50,270).
| Asset type | Basic rate taxpayer | Higher / additional rate taxpayer |
|---|---|---|
| Shares, funds, ETFs, crypto, most assets | 18% | 24% |
| Residential property (not your main home) | 18% | 24% |
| Business Asset Disposal Relief (BADR) | 14% | 14% |
| Carried interest | 32% | 32% |
| Trustees and personal representatives | 24% | 24% |
The unification of property and non-property rates means that for 2025/26 onwards, you no longer need to calculate property gains and other gains separately at different rates. Everything is 18% or 24% depending purely on your income level.
How your income determines your CGT rate
Your taxable income and your net capital gains are added together. The portion of your gains that falls within the basic rate band (up to £50,270 total including income) is taxed at 18%. The portion that exceeds the basic rate band is taxed at 24%.
If your taxable income already fills the basic rate band, all of your gains are taxed at 24%. If you have unused basic rate band, your gains fill it first at 18%, then overflow at 24%.
Annual exempt amount — £3,000
Every individual gets a tax-free allowance each year — the annual exempt amount (AEA). For 2025/26 it is £3,000, frozen at this level until at least 2030. Only net gains above this threshold are subject to CGT.
| Tax year | Annual exempt amount | Change |
|---|---|---|
| 2022/23 | £12,300 | — |
| 2023/24 | £6,000 | Cut by 51% |
| 2024/25 | £3,000 | Cut by 50% |
| 2025/26 | £3,000 | Frozen |
| 2026/27 onwards | £3,000 | Frozen until 2030 |
The AEA is a use it or lose it allowance — it cannot be carried forward to future years. Couples should consider using both allowances by holding assets jointly or transferring assets between spouses before disposal, since transfers between spouses are at no gain, no loss.
If you have assets sitting on unrealised gains, consider disposing of enough each year to use the £3,000 exempt amount. At higher rates, £3,000 of free gains is worth up to £720 per year — £1,440 for a couple. Over a decade that compounds meaningfully. Gains not realised do not use the allowance for that year.
Worked examples
Example 1 — Basic rate taxpayer selling shares
Taxable income: £35,000. Sells shares for a gain of £18,000. Unused basic rate band: £50,270 − £35,000 = £15,270.
Example 2 — Higher rate taxpayer selling a second home
Taxable income: £60,000 (already above £50,270). Sells a second property for £380,000 having paid £220,000. Allowable costs (legal, stamp duty on purchase): £8,000.
For the second home example above, the seller must report and pay the CGT within 60 days of completion using HMRC's online property disposal service — not via the annual Self Assessment return alone. Missing this deadline triggers automatic penalties. The disposal must also be included in the Self Assessment return for that tax year.
What you can deduct — allowable costs
Your gain is calculated as sale proceeds minus the original cost minus allowable costs. Getting these deductions right reduces your taxable gain directly, pound for pound.
- Acquisition costs: the price you paid, plus stamp duty, legal fees, and survey costs on purchase
- Enhancement expenditure: capital improvements that add value and are still reflected in the asset at the time of disposal (not maintenance or repairs)
- Disposal costs: estate agent fees, legal fees, and advertising costs on sale
- Incidental costs: broker commissions and dealing fees on share purchases and sales
Costs that are deductible for income tax purposes — such as mortgage interest on a rental property — cannot also be deducted as allowable costs for CGT. You cannot claim both.
Property — main home, second properties, and PRR
Private Residence Relief — your main home
Gains on your only or main residence are fully exempt from CGT under Private Residence Relief (PRR). You do not need to report or pay CGT when you sell the home you live in as your main residence for the entire period of ownership.
Partial PRR applies if you have had periods of non-occupation, let out part or all of the property, or used part of it exclusively for business. The final 9 months of ownership always qualifies for relief, even if you were not living there (reduced from 18 months in 2020).
Second homes and investment properties
All gains on second homes, buy-to-let properties, and investment properties are fully chargeable to CGT at 18% or 24%. The 60-day reporting and payment rule applies to all residential property disposals where a gain arises — including part-exempt disposals where PRR reduces but does not eliminate the gain.
| Purchase price | Standard rate | Additional property surcharge (+3%) |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,001 – £250,000 | 2% | 5% |
| £250,001 – £925,000 | 5% | 8% |
| £925,001 – £1,500,000 | 10% | 13% |
| Above £1,500,000 | 12% | 15% |
Business Asset Disposal Relief (BADR)
BADR — formerly Entrepreneurs' Relief — provides a reduced CGT rate on qualifying disposals of business assets, up to a lifetime allowance of £1 million.
| Disposal date | BADR rate | Lifetime limit |
|---|---|---|
| Before 30 October 2024 | 10% | £1m |
| 30 Oct 2024 – 5 April 2025 | 10% | £1m |
| 6 April 2025 – 5 April 2026 | 14% | £1m |
| From 6 April 2026 | 18% | £1m |
If you are planning to sell a qualifying business and BADR applies, the rate rises from 14% to 18% on 6 April 2026. On a £500,000 qualifying gain the difference is £20,000 in additional tax. If a sale is possible before the end of the 2025/26 tax year, the timing is worth reviewing with your accountant now.
BADR applies to the disposal of a trading business you own as a sole trader or partner, the sale of shares in your personal trading company (where you hold at least 5% of shares and voting rights, are an employee or director, and have held the shares for at least 2 years), and to personally held assets used in such a trade.
Shares, funds, crypto, and ISAs
Gains on shares, unit trusts, ETFs, and cryptocurrency held outside an ISA are subject to CGT at 18% or 24%. HMRC treats crypto as an investment asset — buying, selling, or exchanging crypto tokens are all chargeable disposals.
ISA shelter: assets held inside a Stocks and Shares ISA are completely exempt from CGT and income tax. There is no limit on the gains you can make inside an ISA. The annual ISA allowance for 2025/26 is £20,000. Gains made on assets before they are transferred into an ISA — via a bed-and-ISA transaction — are chargeable disposals.
Share matching rules (30-day rule)
If you sell shares and buy the same shares back within 30 days, HMRC matches the disposal against the repurchased shares rather than your original holding. This prevents you from crystallising a loss for tax purposes while immediately reacquiring the same position. The 30-day rule applies to disposals by the same person in the same capacity. It does not apply to purchases inside an ISA made by your spouse.
Capital losses and how to use them
Capital losses arise when you dispose of an asset for less than you paid for it. Losses are set against gains in the same tax year first — you cannot choose to carry them forward if there are gains in the current year to absorb them. After offsetting same-year gains, any remaining losses carry forward indefinitely against future gains.
Losses must be claimed within 4 years of the end of the tax year in which the loss arose. Unclaimed losses from 2021/22 must be claimed by 5 April 2026.
If you hold assets sitting at a loss and have realised gains this tax year, consider selling the loss-making assets before 5 April to offset the gains. You can immediately repurchase the same assets after 30 days (to avoid the share matching rules) without losing the economic exposure — or purchase similar assets immediately if losing exposure for 30 days is not acceptable.
Reporting and paying CGT
| Asset type | Reporting method | Deadline |
|---|---|---|
| UK residential property (gain arises) | HMRC online property disposal service | 60 days from completion |
| All other assets (shares, crypto, etc.) | Self Assessment tax return | 31 January 2027 |
| CGT payment on account (non-property) | Via Self Assessment | 31 January 2027 |
For non-property assets, CGT is reported and paid through Self Assessment. If you do not normally file a Self Assessment return, you will need to register with HMRC if your total gains exceed the annual exempt amount or your total disposal proceeds exceed four times the exempt amount (£12,000 in 2025/26).