Capital Gains Tax (CGT) is charged on the profit you make when you sell or otherwise dispose of assets that have increased in value. It is not a tax on the full sale proceeds — only the gain (the increase above your original cost) is taxed. The CGT annual exempt amount for 2026/27 is £3,000, and rates range from 18% to 24% depending on your income and the type of asset.
What is Capital Gains Tax?
CGT applies to individuals, trustees, and personal representatives of deceased persons when they make a chargeable gain on a chargeable asset. It is a separate tax from Income Tax, charged at different rates on different asset types. Unlike Income Tax, CGT is not collected through PAYE — you report and pay it either through Self Assessment or through HMRC's real-time CGT reporting service.
CGT does not apply to companies — they pay Corporation Tax on chargeable gains instead.
What triggers CGT?
CGT is triggered by a disposal. A disposal is broader than just a sale. It includes:
- Selling an asset
- Giving an asset away as a gift (the market value at the date of gift is used as the disposal proceeds)
- Swapping an asset for another (an exchange)
- Receiving compensation for the loss or destruction of an asset (such as an insurance payout)
- Transferring an asset to a trust
Some disposals are exempt: transfers between spouses or civil partners are generally made on a no-gain, no-loss basis (meaning no CGT arises at the time of transfer, but any built-up gain is deferred to the eventual sale). This is a powerful CGT planning tool for married couples and civil partners.
Annual exempt amount 2026/27
Every individual has a CGT annual exempt amount — gains up to this level are not taxed. For 2026/27, the annual exempt amount is £3,000. It was slashed from £12,300 in 2022/23, meaning far more people now pay CGT than in previous years.
The annual exempt amount is personal — you cannot carry it forward to future years or carry it back to previous years. Married couples and civil partners each have their own £3,000 exemption, giving a combined £6,000 on jointly-held assets.
Trustees of most trusts have a lower annual exempt amount of £1,500 (half the individual amount).
CGT rates 2026/27
| Asset type | Basic rate taxpayer | Higher / additional rate |
|---|---|---|
| Residential property (not main home) | 18% | 24% |
| Other assets (shares, bonds, business assets) | 18% | 24% |
| Business Asset Disposal Relief (BADR) | 14% | 14% |
| Investors' Relief | 14% | 14% |
The current rates of 18% and 24% apply from 30 October 2024, following the Autumn Budget 2024. Before this date, rates were 10% (basic) and 20% (higher) for most assets. Residential property rates have been aligned with other assets — they were previously 18% and 28%, then reduced to 18% and 24%.
Whether you pay the basic or higher rate depends on whether the gain falls within your remaining basic rate band. Stack your gains on top of your taxable income: if the total falls within the basic rate limit (£50,270 for 2026/27), you pay 18%. Gains above the basic rate limit are taxed at 24%.
Calculating your capital gain
Your taxable gain is: disposal proceeds minus the original cost (plus allowable costs).
Allowable costs you can deduct include:
- The original purchase price
- Acquisition costs (solicitor's fees, stamp duty paid on purchase)
- Improvement costs that are still reflected in the asset at the date of disposal (adding an extension counts; repainting does not)
- Disposal costs (estate agent's fees, solicitor's fees on sale)
From the total gain, deduct any allowable capital losses (from other disposals in the same tax year, or losses brought forward from previous years) and then deduct your annual exempt amount (£3,000). Tax is charged on the remaining net gain.
Worked example: You sell shares for £40,000 that cost you £15,000. Dealing costs were £500 on purchase and £400 on sale. Your gain is £40,000 minus (£15,000 + £500 + £400) = £24,100. Deduct the annual exemption: £24,100 minus £3,000 = £21,100 net taxable gain.
Assets not subject to CGT
Several categories of assets are completely exempt from CGT regardless of the gain:
- Your main home (subject to Private Residence Relief — see below)
- ISA and JISA investments — returns within ISAs are completely CGT-free
- UK government gilts and qualifying corporate bonds
- Personal possessions worth £6,000 or less (the chattel exemption)
- Cars — regardless of how much they have appreciated
- Betting winnings and premium bond prizes
- Foreign currency for personal use
- Gifts to charity — gifts to registered charities are exempt from CGT
Key CGT reliefs
Private Residence Relief (PRR)
If you sell your main home, the gain is completely exempt from CGT for the periods you lived there as your main residence. If you let the property out at any point, or owned it but did not live there, a proportionate part of the gain may become chargeable. The final nine months of ownership always count as qualifying (previously 18 months, reduced in April 2020).
Business Asset Disposal Relief (BADR)
BADR (formerly Entrepreneurs' Relief) reduces the CGT rate to 14% on qualifying disposals of business assets. From April 2025, the BADR rate increased from 10% to 14% and will rise to 18% from April 2026. The lifetime limit is £1 million of qualifying gains.
To qualify for BADR on a business sale, you must have owned the business for at least two years, and be a sole trader, partner, or employee/director owning at least 5% of the shares and voting rights of a trading company.
Rollover Relief
If you sell qualifying business assets and reinvest the proceeds in new qualifying assets within a specific timeframe, you can defer the CGT until the replacement asset is eventually sold. This is particularly useful for businesses reinvesting in new premises or equipment.
Gift Holdover Relief
When you give away qualifying business assets or assets on which an IHT charge arises (such as gifts into trust), Holdover Relief defers the CGT. The recipient takes over the asset at the donor's original cost, meaning the gain is taxed only when they eventually dispose of it.
Reporting and paying CGT
How you report CGT depends on the type of asset:
Residential property disposals
For gains on UK residential property (second homes, buy-to-let, any property that is not your main home), you must report and pay CGT within 60 days of completion. This is done through HMRC's CGT on UK property account on GOV.UK. You must also report the disposal on your Self Assessment return — the 60-day return is not sufficient on its own if you file Self Assessment.
All other assets
For shares, business assets, foreign property, and other assets, you report gains via Self Assessment by 31 January following the end of the tax year in which the disposal occurred. For a gain in the 2025/26 tax year, the reporting deadline is 31 January 2027.
If you do not normally file Self Assessment, you can report CGT on other assets through HMRC's Real Time Capital Gains service (available in your Government Gateway account), which allows you to report and pay CGT outside of Self Assessment. This route is available if your total gains are within £50,000 and your total taxable gains (after exemptions) are within the basic rate band.
CGT on residential property — the 60-day rule
The 60-day reporting rule for residential property is one of the most frequently missed CGT obligations. From 27 October 2021, the deadline was reduced from 30 days to 60 days, but this is still very short — from completion, not exchange of contracts.
The rule applies even if:
- No CGT is payable (you still need to report the disposal)
- You have capital losses that offset the gain
- The gain falls within your annual exempt amount
If you are in doubt about whether a report is required, it is safer to report than to assume you do not need to. Failure to report within 60 days attracts automatic penalties and interest.
CGT planning tips
- Use your annual exemption. At only £3,000, this is limited — but making use of it each year through ISA contributions or crystallising small gains can prevent an accumulation problem.
- Transfer assets to a spouse before selling. If your spouse pays a lower CGT rate than you, transferring assets to them before disposal shifts the gain to their (lower) rate band. Transfers between spouses are on a no-gain, no-loss basis.
- Bed and ISA. Sell shares held outside an ISA to crystallise a gain within the annual exemption, and repurchase immediately inside an ISA. Future growth is then sheltered from CGT.
- Carry forward losses. Capital losses can be carried forward indefinitely. Report them on your tax return even in years with no gains — failing to report losses means you lose them.
- Time your disposal. If you are about to cross a rate band, consider deferring a disposal to the next tax year when you may have more of your basic rate band available.
Key takeaways
- CGT applies to the gain (increase in value) on disposal of chargeable assets — not the total sale proceeds. The annual exempt amount for 2026/27 is £3,000.
- CGT rates from 30 October 2024: 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers on most assets, including residential property.
- Business Asset Disposal Relief reduces the CGT rate to 14% on qualifying business disposals, rising to 18% from April 2026, up to a £1 million lifetime limit.
- Residential property CGT must be reported and paid within 60 days of completion — even if no tax is owed.
- Transfers of assets between spouses and civil partners are made on a no-gain, no-loss basis, making them an effective planning tool.
Frequently asked questions
Do I have to pay CGT when I sell my home?
Generally no, if you have lived in the property as your main residence throughout your ownership. Private Residence Relief exempts the gain for the periods you occupied the property as your main home, plus the final nine months of ownership in all cases. CGT becomes an issue if you have let the property, used it partly for business, or owned it without living in it for extended periods.
How is CGT calculated on shares?
The gain on shares is the sale proceeds minus the original cost. For shares in the same company bought at different times, HMRC uses a pooling rule (the "Section 104 pool") that averages the cost across all shares. The average cost per share is applied to each disposal. From the gain, deduct allowable costs (broker commissions) and your annual exempt amount, then apply the relevant CGT rate.
Can I offset capital losses against capital gains?
Yes. Capital losses from the same tax year are offset against capital gains before the annual exempt amount is applied. If your losses exceed your gains in one year, the excess loss is carried forward to future years — it never expires. Report losses on your Self Assessment return even if you have no gains in that year, otherwise HMRC will not have a record of them to carry forward.
What is the CGT reporting deadline for shares and other assets?
For most assets (shares, business assets, personal possessions over £6,000), you report gains through Self Assessment by 31 January following the tax year end. For gains in 2025/26, the deadline is 31 January 2027. If you do not normally file Self Assessment and your gains are within certain limits, you can use HMRC's Real Time Capital Gains service to report outside the Self Assessment process.
Is CGT charged on inherited assets?
No CGT is charged at the point of inheritance — assets pass to the beneficiary at their probate value (market value at the date of death), which becomes the new base cost. Any CGT is only triggered if and when the beneficiary later sells the asset. This "uplift" in base cost can eliminate a large built-up gain that the deceased had — which is one reason gifts before death can be less tax-efficient than allowing assets to pass on death.