Capital Gains Tax Explained: How CGT Works in the UK
A plain English guide to understanding when you owe CGT, how much you'll pay, and how to calculate your tax bill.
Last updated: April 2026
TL;DR
Capital Gains Tax is a tax on profit when you sell assets like property (not your main home), shares, or valuables. You get a £3,000 annual tax-free allowance. After that, you pay 18% (basic rate) or 24% (higher rate) on all assets, regardless of asset type. Your main home is usually exempt.
What Is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax you pay on the profit you make when you sell or "dispose of" an asset that has increased in value. The key word is profit – you're not taxed on the total sale price, only on how much more you received compared to what you originally paid.
For example, if you bought shares for £10,000 and sold them for £15,000, your gain is £5,000. That £5,000 is what CGT applies to – not the full £15,000.
"Disposing" of an asset doesn't just mean selling it. It also includes:
- Giving it away as a gift
- Swapping it for something else
- Receiving compensation (like an insurance payout)
- Transferring it to someone other than your spouse or civil partner
When Do You Pay CGT?
You may need to pay CGT when you dispose of:
Taxable Assets
- • Second homes and buy-to-let properties
- • Shares and investments (outside ISAs)
- • Business assets
- • Cryptocurrency
- • Valuable items worth over £6,000 (art, jewellery, antiques)
- • Land
Exempt from CGT
- • Your main home (Private Residence Relief)
- • ISAs and pensions
- • UK government gilts and Premium Bonds
- • Personal possessions worth £6,000 or less
- • Cars
- • Gifts to charity
- • Transfers to spouse or civil partner
Your main home is usually exempt, but partial CGT may apply if you've rented it out, used it for business, or the grounds exceed 0.5 hectares.
Capital Gains Tax Rates Explained
Since October 2024, CGT rates are unified across all asset types. For 2026/27, you pay 18% (basic rate) or 24% (higher/additional rate) on all assets — there is no longer a distinction between residential property and other assets.
| Tax Year | Asset Type | Basic Rate | Higher Rate |
|---|---|---|---|
| 2026/27 | Residential property | 18% | 24% |
| Other assets (shares, crypto) | 18% | 24% | |
| 2024/25 (before 30 Oct) | Residential property | 18% | 28% |
| Other assets (shares, crypto) | 10% | 20% |
Which rate applies to you? Your CGT rate is based on your total taxable income plus your gains. If adding your gain keeps you within the basic rate band (up to £37,700 for 2026/27), you pay the lower rate. If it pushes you into higher rate territory, that portion is taxed at the higher rate.
The CGT Allowance
Everyone gets an annual tax-free allowance called the Annual Exempt Amount. For 2025/26 and 2026/27, this is £3,000.
Recent Changes to the Allowance
- • 2022/23: £12,300
- • 2023/24: £6,000
- • 2024/25: £3,000
- • 2025/26: £3,000
- • 2026/27: £3,000
Key points about the allowance:
- You only pay CGT on gains above £3,000
- It resets each tax year (6 April to 5 April)
- You can't carry unused allowance to future years
- Married couples and civil partners each get their own £3,000 allowance
How Capital Gains Tax Is Calculated
Here's the step-by-step calculation:
- Work out your gain: Sale price minus purchase price
- Deduct allowable costs: Subtract buying/selling fees, improvement costs (not maintenance)
- Apply any reliefs: Private Residence Relief, Letting Relief, or other applicable reliefs
- Deduct your annual allowance: Subtract £3,000
- Calculate the tax: Apply the appropriate rate based on your income band and asset type
Example Calculation
Sarah is a higher rate taxpayer. She sells shares for £50,000 that she bought for £30,000.
- Gain: £50,000 - £30,000 = £20,000
- Less dealing costs (£200): £20,000 - £200 = £19,800
- Less annual allowance: £19,800 - £3,000 = £16,800 taxable
- Tax at 24% (higher rate): £16,800 × 24% = £4,032 CGT due
Common CGT Mistakes
Forgetting to report property sales within 60 days
When you sell UK residential property with a CGT liability, you must report and pay within 60 days of completion. Missing this deadline can result in penalties.
Not using your spouse's allowance
Transfers between spouses are CGT-free. Consider transferring assets before selling to use both £3,000 allowances and potentially benefit from a lower tax rate.
Missing allowable costs
You can deduct stamp duty, legal fees, estate agent fees, and improvement costs (not repairs). Keep records of all expenditure that enhanced the asset's value.
Selling everything in one tax year
If you have multiple assets to sell, consider spreading sales across tax years to use multiple annual allowances and potentially stay in a lower tax band.
Frequently Asked Questions
Calculate Your Capital Gains Tax
Use our free CGT calculators to estimate how much tax you'll owe on your specific situation.