What Is Capital Gains Tax?

The simple version

If you buy something for £10,000 and sell it for £18,000, your gain is £8,000. Capital Gains Tax is charged on that £8,000, not on the full £18,000 sale price.

CGT applies to assets including shares and investments, second properties, business assets, and certain personal possessions worth over £6,000 (like valuable jewellery or art). It does not apply to your main home (with some exceptions), ISAs, pensions, or UK government bonds (gilts).

The annual exempt amount

Everyone gets a CGT-free allowance each year. However, this has been cut significantly:

• 2022/23: £12,300
• 2023/24: £6,000
• 2024/25 onwards: £3,000

You only pay CGT on gains above this amount in a tax year. Gains below £3,000 per year are tax-free.

CGT rates (2025/26)

The rate you pay depends on what type of asset it is and whether you’re a basic or higher-rate taxpayer:

Shares, funds, and most other assets:

• Basic rate taxpayers: 18%
• Higher/additional rate taxpayers: 24%

Residential property (not your main home):

• Basic rate taxpayers: 18%
• Higher/additional rate taxpayers: 24%

Note: CGT rates on residential property were cut from 18%/28% to 18%/24% in the October 2024 Budget.

To determine which rate you pay, your capital gains are added on top of your taxable income. If your total income plus gains push you into the higher-rate band, the portion above the higher-rate threshold is taxed at the higher CGT rate.

What counts as a disposal?

It’s not just selling. You make a disposal when you:

• Sell an asset
• Give an asset away (except to a spouse/civil partner)
• Swap one asset for another
• Receive compensation for an asset that was lost or destroyed

Transfers between spouses and civil partners are CGT-free — useful for tax planning if one partner has a lower income.

Your main home — Private Residence Relief

You don’t normally pay CGT when you sell your main home. This is called Private Residence Relief (PRR). But there are exceptions:

• If you’ve let part of the property (only part of the gain is covered)
• If you’ve been away from the property for extended periods
• If the garden or grounds are very large (over half a hectare)
• If you bought the property specifically to make a gain

CGT exemptions and reliefs: what the rules allow

HMRC legislation provides several statutory exemptions that affect whether CGT is due:

• ISA exemption: under HMRC rules, gains on investments held inside an ISA are not subject to CGT.
• Annual exempt amount: HMRC does not charge CGT on gains below £3,000 per tax year (2024/25 onwards). Unused annual exempt amount cannot be carried to future years.
• Capital losses: under HMRC rules, allowable losses in a tax year are deducted from gains in the same year. Unused losses can be carried forward to future tax years.
• Spousal transfers: HMRC does not treat transfers between spouses or civil partners as disposals, so no CGT arises on the transfer itself.

The full rules on CGT exemptions and reliefs are published at gov.uk/capital-gains-tax.

How to report and pay CGT

If you sell property, you must report and pay CGT within 60 days of completion using HMRC’s online service — even if you’re not normally required to complete a Self Assessment tax return.

For other assets (shares, funds, etc.), you report via Self Assessment for the tax year in which the disposal occurred. The deadline is 31 January following the end of the tax year.