Capital Gains Tax UK 2026: Rates, Allowances & How to Report

What Is Capital Gains Tax and When Does It Apply?

Capital Gains Tax is a tax on the profit — or 'gain' — you make when you dispose of an asset that has risen in value. It is the gain that is taxed, not the total proceeds from the sale. A 'disposal' can mean an outright sale, but it also covers gifting an asset, transferring it to someone else, swapping it for something else, or receiving compensation for an asset (such as an insurance pay-out).

CGT applies in a wide range of everyday financial situations. Selling shares outside of an ISA, disposing of a second property, transferring valuable assets to a family member, or selling a business — all of these can trigger a CGT liability. It is worth noting that CGT is calculated per tax year, running from 6 April to 5 April, and your total gains for the year are assessed after deducting the Annual Exempt Amount and any allowable costs.

CGT does not apply when you die; instead, assets are passed on at their market value at the date of death for Inheritance Tax purposes. However, if your beneficiaries later sell those assets and they have appreciated further, CGT may apply to the gain made after the date of inheritance. Understanding when a disposal occurs and how to calculate the resulting gain is the essential first step to managing your tax position effectively.

CGT Rates and the Annual Exempt Amount for 2026

For the 2025/26 tax year, every individual has an Annual Exempt Amount of £3,000. This means the first £3,000 of net gains in a tax year is completely free of CGT. Gains above this threshold are added on top of your taxable income to determine which rate you pay. The Annual Exempt Amount cannot be carried forward to future tax years if it is unused, so planning your disposals carefully across tax years remains an important strategy.

The rate of CGT you pay depends on both the type of asset and your income tax band. For residential property (excluding your main home), gains are taxed at 18% if you are a basic rate taxpayer, and 24% if you are a higher or additional rate taxpayer. These rates were updated in the Autumn 2024 Budget. For most other chargeable assets — including shares, funds, and business assets — the rates are 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.

It is important to remember that your gains are stacked on top of your income for rate purposes. For example, if your taxable income uses up part of your basic rate band but a gain then pushes you into higher rate territory, the portion of the gain falling within the remaining basic rate band is taxed at the lower rate, and the rest at the higher rate. Married couples and civil partners each have their own Annual Exempt Amount, so transferring assets between spouses before disposal can be a legitimate and effective way to use both allowances.

Which Assets Are Subject to CGT?

CGT potentially applies to a broad range of assets. Personal possessions worth more than £6,000 (known as 'chattels') can be subject to CGT, although special rules apply. Shares, unit trusts, and other investments held outside of a tax-efficient wrapper such as an ISA or pension are among the most common sources of CGT liability for ordinary investors. Cryptocurrency is also treated as a chargeable asset by HMRC, and gains from buying and selling crypto must be reported in the same way as share gains.

Property is another major area. Buy-to-let properties, holiday lets, inherited properties, and any residential property that is not your primary home are all subject to CGT on disposal. Commercial property and land are similarly chargeable. Business assets — including goodwill, equipment used solely for business purposes, and shares in unlisted companies — can also attract CGT, although important reliefs (discussed below) may significantly reduce the bill.

It is worth highlighting that assets held jointly are assessed proportionally. If you own a rental property with a partner who is not your spouse, you will each be assessed on your respective share of the gain. Keeping clear records of the original purchase price, associated costs, and any capital improvements made to an asset is essential, as this information will be needed when calculating and reporting any gain.

Assets Exempt from Capital Gains Tax

Not everything you own is subject to CGT, and understanding the exemptions is just as important as knowing the rates. Your main home — the property you live in as your primary residence — is usually fully exempt under Private Residence Relief (PRR). This relief can be partial if you have let the property, used part of it exclusively for business, or have not lived in it throughout your period of ownership, so it is worth checking your position carefully if your circumstances are complex.

ISAs (Individual Savings Accounts) are completely sheltered from CGT, regardless of how large the gains inside them grow. This makes maximising your annual ISA allowance one of the most straightforward tax-planning steps available to UK investors. Other notable exemptions include: NS&I Premium Bonds (winnings and the bonds themselves are exempt); most private cars, even if they appreciate in value; UK government gilts (bonds); and personal injury compensation. Gifts to registered charities are also exempt from CGT, making charitable giving a tax-efficient option for those with highly appreciated assets.

How to Report and Pay CGT: Self-Assessment, Real-Time Service, and the 60-Day Rule

For most assets, CGT is reported through Self-Assessment. If you have a gain to declare, you must complete a Self-Assessment tax return for the relevant tax year and pay any CGT owed by 31 January following the end of that tax year. If you do not normally file a tax return, you can use HMRC's 'real-time' CGT reporting service (available through your Government Gateway account) to report gains and pay the tax promptly without waiting until January. This can be useful for managing your cash flow and avoiding unexpected bills. You must register for Self-Assessment if your gains exceed the Annual Exempt Amount or your total proceeds from asset sales exceed four times the Annual Exempt Amount (£12,000 in 2025/26).

Residential property disposals are subject to a stricter 60-day reporting rule. If you sell a UK residential property and make a chargeable gain, you must report it to HMRC and pay the estimated CGT owed within 60 days of the completion date. This is done via HMRC's online 'Report and pay CGT on UK property' service. Missing this deadline can result in automatic penalties and interest charges, even if the tax is eventually paid in full. For non-UK residents selling UK property, the same 60-day rule applies to all UK property sales, not just residential ones. Keeping this deadline in mind from the moment you accept an offer on a property is strongly advisable.

Allowable Costs and Business Asset Disposal Relief

When calculating your gain, you are entitled to deduct allowable costs from your proceeds. These include the original purchase price, stamp duty or transaction costs paid when you bought the asset, legal and estate agent fees paid on both acquisition and disposal, and the cost of any capital improvements (not repairs or maintenance) made during your ownership. For shares, you may also be able to use the share matching rules and pool your costs. Keeping thorough records of all costs from the point of purchase is essential — HMRC may ask you to evidence these figures if they query your return.

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief, is one of the most valuable CGT reliefs available to business owners. It reduces the CGT rate to just 10% on qualifying gains, subject to a lifetime limit. However, the lifetime limit was reduced from £1 million to £1 million for disposals from April 2025, with the rate set to increase to 14% for disposals made on or after 6 April 2025 and 18% from 6 April 2026 under the changes announced in the Autumn 2024 Budget — so it is critical to check the latest HMRC guidance for the precise rate applicable at the point of your disposal. To qualify, you typically need to have owned the business or shares for at least two years and meet other conditions relating to your role and shareholding. Seeking professional advice before a business sale is strongly recommended to ensure you meet all qualifying criteria.

Frequently Asked Questions